June 15, 2012 | Views on the News | | Views: 181

Corn Roles

The commodity plays double-duty as food and fuel source, but which is best for industry?

As I delve into research for my next Focus on Biofuels article, which will analyze the impact of the EPA’s decision to approve the sale of higher ethanol/gasoline blends, I’m confronted with the fact I’m quite torn on the issue of using corn for fuel.

Evidence both in support of and against the widespread adoption of ethanol is mounting. The positives, as pointed out by groups like the Renewable Fuels Association (RFA) and the National Corn Growers Association (NCGA), as well as the U.S. government include:

  • Reduced dependency on foreign oil imports
  • Rural American jobs creation
  • Creation of the beef, dairy and swine feed option, DDGS 
  • Reduced gas prices

As the economy continues to flounder and the news on jobs and unemployment is grim, it’s encouraging to know there is a sector right here in the Midwest (Wisconsin girl talking) that isn’t losing jobs. In fact, the NCGA reported that in 2011, the U.S. ethanol industry helped support more than 400,000 jobs and contributed $42.4 billion to the Gross Domestic Product, adding $30 billion to household incomes. That’s nothing to sneeze at.

And of course, I, as well as every car-driving American, could live with cheaper gas prices any day. But are we really getting a better value with this less expensive fuel? Let’s examine some negatives to help make that call.

Ethanol’s first downside:  lower gas mileage, as a Consumer Reports article from 2011 noted. It tested a 2007 Chevrolet Tahoe FFV (Flex Fuel Vehicle) and recorded a drop from 21 highway miles per gallon with conventional gasoline to only 15 with E85 (gasoline blended with 15% ethanol). Similar results were produced with in-city driving tests and the authors noted that a drop in gas mileage should be expected with all current FFVs.

On June 15 the EPA approved the use of E85 in all vehicle manufactured in 2001 or later. I can hardly imagine that cars and trucks that were not designed specifically for E85 would fare any better than the Tahoe FFV in mpg tests.

Not to mention there is evidence that E85 may even be harmful to vehicle and light truck engines, according to an American Petroleum Institute (API) study. (In all fairness, this study was funded by an association that represents the oil and natural gas industry, and the American Coalition for Ethanol quickly pointed out its flaws). The study found that using higher blends such as E85 and E80 (20% ethanol) in vehicle engines resulted in more corrosion, adhesion and abrasion because ethanol has less lubricity than gasoline and it can absorb 50 times more H2O than gasoline alone.

Bringing the debate a little closer to the feed and grain realm, let’s look at ethanol policy and its correlation to corn prices. The Renewable Fuels Standard was a mandate enacted in 2005 that required 7.5 billion gallons of renewable fuel to be blended into gasoline by 2012. To the feed industry, this definitely goes under the negative column.

The early 2000s saw skyrocketing corn prices, consequentially leading to economic catastrophes for the poultry, swine and beef industries, as corn makes up nearly 60% of the cost of meat production. The RFS is thought to be a main driver of the sharp incline in corn prices and the feed industry continues to support alternative legislation that will reduce strain on the corn market.

Although the EPA’s recent decision about E85 does not regulate the blending of more ethanol into gasoline, it is a green light for ethanol companies to produce 5% more ethanol than they previously were allowed to. Considering 14 billion gallons of ethanol were produced last year, a 5% increase equals a lot of corn.

What do you think? Is corn a good source of renewable fuel or should the government and industry invest more in cellulosic, wind, solar or other green energy sources? 

More Articles

Big Export Sales Hit Soybean Market

October 23, 2014 | Grain Hedge Insights | Cody Bills

Corn and wheat futures are unchanged while soybeans are trading 3 cents higher coming out of the overnight session.


This morning’s export sales report showed continued strong demand for U.S. soybeans. The USDA reported 2,166,800 tonnes sold for the current marketing year, with China...

[Read More]

Grains Continue Higher in the Overnight

October 22, 2014 | Grain Hedge Insights | Cody Bills



Soybeans surged another 12 cents higher in the overnight on very light news. A close above 972 ½ on the November 14 contract would be a strong technical signal that October’s price...

[Read More]

Dryness Concerns in Brazil

October 21, 2014 | Grain Hedge Insights | Cody Bills

In the overnight session corn was unchanged, soybeans traded 5 1/4 cents higher and wheat improved 2 1/2 cents. 


Brazil’s key growing state of Mato Grasso is seeing dryer than normal planting conditions as Brazilian producers ramp up planting. Over the last thirty days the majority of...

[Read More]