This is an excerpt from EERE Network News, a weekly electronic newsletter.

January 10, 2007

Ethanol Production Estimated at 5 Billion Gallons in 2006

The Renewable Fuels Association (RFA) estimates that U.S. production of ethanol fuel reached 5 billion gallons in 2006, an increase of about 28 percent over 2005, when about 3.9 billion gallons were produced. The RFA attributes the industry growth to the phase-out of MTBE as a fuel additive (with ethanol providing the best replacement option), federal renewable fuels production requirements, and growing demand for clean fuels. At year's end, the industry had 110 ethanol biorefineries with enough combined capacity to produce more than 5.3 billion gallons of ethanol per year, plus enough projects set to go online in the next 18 months to more than double that capacity. Ethanol is also finding new outlets to the consumer, as 1,000 fuel pumps in the United States are selling E85, a mixture of 85 percent ethanol and 15 percent gasoline. See the RFA press release (PDF 144 KB). Download Adobe Reader.

A new report from the Earth Policy Institute (EPI) says that RFA and the U.S. Department of Agriculture (USDA) are actually underestimating the growth of the ethanol fuel industry. According to EPI, the USDA expects ethanol fuel distilleries to require 60 million tons of corn from the 2008 harvest, while EPI estimates are more than twice that, at 139 million tons. Actually, the EPI data is close to what the RFA is anticipating in the near term, but its long-term projections include 200 planned ethanol distilleries that may or may not come to fruition. The EPI press release expresses concerns about the impact of the ethanol fuels market on corn prices. See the EPI press release.

Corn prices are definitely on their way up: a USDA report released in early December projects corn prices ranging from $2.80 to $3.30 per bushel for the current market year (which started in September 2006), compared to $2.00 to $2.06 per bushel for the previous two market years. The report projects ethanol fuel consuming 2.15 billion bushels of corn in the current market year, up from 1.6 billion bushels in the previous market year. That's about 20 percent of the roughly 10.7 billion bushels of corn that are projected to be produced this year. See page 12 of the World Agricultural Supply and Demand Estimates (PDF 126 KB), produced by the USDA's World Agricultural Outlook Board. Download Adobe Reader.