Grainnet, IL
01-23-07
GRAINNET EXCLUSIVE: Bob Wisner Interview ... Part 2: Ethanol Industry
Growth on Corn Yields
In the second of a daily three-part series, Dr. Robert Wisner, extension agricultural economist at Iowa State University , shares his observations on the ethanol industry's impact on agriculture.
By Ed Zdrojewski, Grain Journal Editor
When it comes to ethanol production and its impact on corn producers and grain elevators, the State of Iowa is ground zero.
According to the Iowa Renewable Fuels Association, Iowa is the leading state for ethanol production, with 26 plants currently producing 1.7 billion gallons of ethanol annually.
Another 12 plants are either under construction or being expanded across the state, which would add another 1.1 billion in production capacity.
Wisner has become a well-known observer of the biofuels scene in Iowa and surrounding states, and has plenty to say about the ethanol industry’s likely impact on every sector of agriculture, including the grain elevator business.
A native of Michigan, Wisner has bachelor’s and master’s degrees from Michigan
State University and a doctorate from the University of Tennessee, all in agricultural economics. He has been on the ISU faculty since 1967.
Grain Journal reached him in mid-January at his office on the Ames campus.
How quickly will ethanol plant construction level off?
We will come to a point where the last entrants into the industry will experience substantial financial pressure.
I don’t know where this will happen, although plants outside of the Corn Belt or cattle-feeding areas will be under more pressure.
We have less than 1 billion bushels of capacity left before we reach the saturation point.

That translates into about 22 or 23 more 100-million-gallon-per-year plants beyond those currently in operation or under construction.
Who is right, those who say we can’t possibly produce enough corn to meet the needs of all these ethanol plants or those who say anticipated increases in corn yields will cover it?
It is certain that there will be substantial increases in corn yields in the next few years, but we still will need to shift a lot of cropland, pasture, and CRP acres to corn production.
Here in Iowa, we have 12.4 million acres of corn for grain, not including uses such as silage. In 2005, corn yields averaged 173 bushels per acre, which is a good, solid year in Iowa.
Let’s assume we can add 15 bushels per acre—188 bushels is a reasonable number for planning 3-1/2 to five years out.
Also assume no increase in acreage, all proposed plants are built, we maintain feed demand including feeding all the DDGS to recommended levels, and we meet export commitments outside of Iowa.
We would need to produce 313 bushels per acre to meet all of these needs five years out.
On the other hand, that could be met by shifting another 8 million acres to corn production, which is about a two-thirds increase.
That will take major changes in crop rotations. But the market will buy those acres, as long as crude oil prices remain high enough.
I’m not predicting a shortage of corn, but a dramatic change to every aspect of
Midwestern agriculture, from seed to fertilizer to grain elevators to livestock, even farm equipment.
We are moving into a period of very rapid change.
For more information, call Iowa State University at 515-294-6310.