KIMT News 3, IA
11-30-07
Ethanol Boom or Bust?
by Briana Denney
KIMT News 3
Since 2005, then the number of ethanol plants have doubled. One-hundred thirty
plants are in operation and there are nearly a 80 more under construction or
being planned.
"I get to start over every year with a small seed and a hope and a prayer and
grow it into something that helps feed and fuel the world," said farmer Steve
Andregg.
Fueling the world is just what he is doing. Now that harvest season is over, the
North Iowa farmer is getting ready for winter. And all of this year's crop is going to
a local ethanol plant.
"The Iowa farmer will follow the market to allow them to continue to make a
profit," said Andregg.
Following the market is just what Iowa farmers are doing as they plant their
crops. Over the past year, Andregg's watched his neighbors switch from growing
both soybeans and corn, to virtually raising corn fulltime.
"Many Iowa farmers can switch very fast," said Andregg.
The reason for the rush to corn is its price. A bushel will bring nearly four
dollars. Most of the corn is heading to ethanol plants these days and the rising
cost of that corn is creating some problems for Mason City's Golden Grain
Energy.
"High corn prices and lower ethanol prices we have a far more narrow margin to
work off of," said Walter Wendland, the CEO of Golden Grain Energy.
The narrow margin is why Iowa State University economics professor David
Swenson believes ethanol is entering a state of financial stress. He writes "...a
combination of high corn prices and an oversupply of ethanol does not lead to
investor confidence." And Swenson notes that "...investors are quickly
abandoning this opportunity." One of the reasons could be the fact that ethanol's
popularity is mostly a midwestern phenomenon. All of the gasoline sold at
Minnesota fuel stations contains some ethanol.
That figure is 75 percent in Iowa. But in most of the southern United States, the
amount of ethanol mixed with regular gasoline can be as low as one percent.
Swenson said one reason that the use of ethanol is so low in certain areas is
people "yet to understand the advantages of using ethanol and are therefore
slow to adopt the fuel." Most cars are designed to burn a mix of up to ten percent
of ethanol/to regular fuel, per gallon. But if you wanted to burn e-85, which is 85
percent ethanol, per gallon, you'd have to buy a vehicle that is made to handle
that mix. Despite the lower fuel economy of e-85 per gallon, some believe
ethanol blended gasolines are a no brainer.
"Save the consumers a lot of money at the pumps," said Wendland.
The price of ethanol blended fuel is cheaper than gasoline but that price has
government subsidies, or support money if you will, built in. It's about 50 cents
worth per gallon and professor Swenson believes ethanol cannot survive without
that money. He writes that "ethanol as a fuel substitute can never be worth any
more than two-thirds of a comparable amount of unleaded gasoline." But
wendland argues that ethanol is what we have to work with now, to help reduce
our dependence on foreign oil.
"We're not saying grain base ethanol product is the total answer for our energy
needs for the u.s. but it's a piece of the puzzle," said Wendland.
And Steve Andregg agrees that ethanol is a very important piece of that puzzle.
He also sees a bright future ahead.
"Ethanol industry is a growing industry and they continue to perfect that
industry," said Andregg.
Andregg and others will continue to seek the best price they can find for their
crops.