Fast Facts

Ethanol: Just The Facts Ma'am
Aug 1, 2008 12:00 PM

In the face of a continued barrage of questions about the economic and environmental feasibility of ethanol, here are some facts to set the record straight.

The Iowa Corn Growers Association, the National Corn Growers Association and USDA-ERS offer the following stats to counter falsehoods circulating in the popular press:

• Corn represents less than a penny in most supermarket products. A gallon of milk contains about 13¢ worth of corn. Growing demand for animal protein in the developing world will continue to increase demand for corn. Fortunately, many livestock can be fed the ethanol byproduct DDGS.
• Global weather patterns and increased demand for grain from developing countries have increased grain prices, in addition to demand for corn-based ethanol.
• Corn represents only 19¢ of a pound of hamburger and 26¢ to a pork chop, according to Iowa Corn Growers Association calculations.
• A dozen eggs contains 28¢ worth of corn.
• One bushel of corn produces thirty-eight 12-oz. boxes of cereal.
• Even a hypothetical 30% increase in corn prices would increase consumer food prices by only about 1.1%, according to a study by the Center for Agricultural and Rural Development at Iowa State University.
• Higher corn prices increase animal feed and ingredient costs for farmers and food manufacturers, but pass through to retail prices at a rate of less than 10% of the corn price change, according to USDA data presented in its Amber Waves magazine.
• “Given that foods using corn as an ingredient make up less than one-third of retail food spending, overall retail food prices would rise less than 1%/year above the normal rate of food price inflation when corn prices increase by 50%,” it says. (See www.ers.usda.gov/AmberWaves/February08/Features/CornPrices.htm.)
• An 18-oz. box of corn flakes contains about 12.9 oz. of milled field corn, worth almost 5¢ (based on $3.40/bu. corn, the average 2007 price). A 49% increase in corn prices would be expected to raise the price of a box of corn flakes by about 1.6¢, or 0.5%, says USDA.
• Ethanol is less expensive than MTBE, the fuel oxygenate that it replaces.
• The efficiency of ethanol production continues to improve. For example, a bushel of corn now yields 2.8 gal. of ethanol, up from 2.5 gal. just one year ago.
• Ethanol has created more than 147,000 jobs — many of them in rural communities — has boosted U.S. household income by $4.4 billion and reduced the U.S. trade deficit by $5.1 billion by eliminating the import of 143.3 million barrels of oil. This information comes from a January 2005 study by LECG.
• Ethanol represents 5% of motor fuel, and if eliminated, gas prices would rise 10-12%, according to Kansas State Ag Economist Mike Woolverton.
• If ethanol supplies rise 5%, gasoline prices would likely drop by more than 5%, Woolverton says.
• If ethanol demand for an extra 1 billion bushels is eliminated, corn prices would fall to $3, Woolverton says.

Ingenuity has been a theme of the American story, and ethanol is another chapter,” says NCGA President Ron Litterer. “We should be proud that our farmers are seeking ways to reduce dependence on a finite energy source, help spur their local economies and help the taxpayer.”

Corn & Soybean Digest, August 2008

 

Ag Update PDF - Crops September 2008