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Ethanol Increasingly a Stabilizing Factor for Iowa Farmers' Income

  • Monday, 09 January 2017 10:52

The Daily Nonpareil

January 8, 2017

By Jon Leu

At a time when Iowa farmers produced a second consecutive record corn crop amid falling prices for their commodity, the state’s growing ethanol industry remains a stabilizing factor.

National crop production reports released in mid-December showed Iowa corn production in 2016 at 2.69 billion bushels, up from 2.51 billion bushels in 2015. But average statewide corn prices fell from $3.37 to $3.01 per bushel from November 2015 to November 2016.

Brian Cahill, president and general manager of the Southwest Iowa Renewable Energy ethanol plant south of Council Bluffs, said that without SIRE and the 42 other ethanol plants in Iowa, prices would be even lower.

“Without ethanol,” he said, “farmers would be hurting. We’re a steady buyer.”

SIRE purchases 40 million to 50 million bushels of corn annually, more than 125,000 bushels daily – roughly 40 percent of the corn produced within a 75-mile radius of the Council Bluffs plant. Now paying about $3.20 per bushel, Cahill said SIRE pays between 10 to 15 cents more per bushel than offered by most elevators.

Kelly Nieuwenhuis has been farming near Primghar in northwest Iowa’s O’Brien County for nearly 40 years.

He said that for 23 of his first 25 years farming, the cost of producing corn was greater than was being paid for the commodity. That changed with the coming of ethanol production in Iowa.

Currently a member of the Iowa Renewable Fuels Infrastructure Board, Nieuwenhuis said the state’s growing ethanol industry has created a firm base for corn prices.

“Before ethanol, $1.50 to $1.80 corn was the norm,” he said. “Ethanol has been a boon for farmers. I sell 100 percent of the corn I produce to the ethanol plants around me, which pay 12 to 14 cents above the market price.

“Those plants need a constant source of corn. During the harvest season, they were pushing 30 cents above the market price.”

Cahill echoed Niewenhuis’s remarks.

“The amount of corn being produced is more than the demand,” he said. “Without ethanol, the price farmers could get for their corn would be lower.”

Last year, Iowa’s 43 ethanol plants produced 4.1 billion gallons of ethanol, slightly less than 30 percent of the entire U.S. production. The 43 plants employed 9,000 workers, supported 43,000 additional jobs in associated industries, added more than $4.6 billion to Iowa’s gross domestic product and generated more than $2 billion of income for Iowa households.

The state board to which Gov. Terry Branstad appointed Nieuwenhuis currently oversees the distribution of some $3 million annually. The money, appropriated by the Legislature through June 30 of this year, is distributed through grants to fuel retailers to ensure that they have the equipment necessary to offer higher blends of ethanol now and in the future.

But, with this year’s Legislature facing the task of dealing with a $100 million shortfall in the state budget, some – perhaps all – of the $3 million allocated annually for the Iowa Renewable Fuels Infrastructure Program could be on the chopping block.

That would come at a time when most vehicle manufactures are approving the use of a 15 percent ethanol blend – up from 10 percent – in vehicles manufactured since 2001. Two manufacturers have approved the use of a 25 percent ethanol blend.

The impact of those changes in the percentage of ethanol that can be used in vehicles would be significant for farmers in Iowa and throughout the country.

“As you move up from the widely available 10 percent ethanol blend, every 1 percent increase in the amount of ethanol blended requires 500 million additional bushels of corn,” Nieuwenhuis said.

As was the case with Iowa’s record corn crop in 2016, the combined 4.1 billion gallons of ethanol produced by the state’s 43 ethanol plants was also a record.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said his organization’s top state policy priority for 2017 is securing funding for the Iowa Renewable Fuels Infrastructure Program to ensure more retailers have the equipment needed to offer higher blends of ethanol.

“Iowa has the resources, both in corn and plant capabilities, to do much more,” Shaw said in a release. “In order to unlock this wealth of untapped potential, we need to move beyond E-10 and ensure that all consumers have access to higher blends of ethanol at the pump, like E-15.

“The federal government needs to break down regulatory barriers to higher blends that serve no purpose other than to protect petroleum.”

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