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Agrimarketing : November December 2007
November/December 2007 AgriMarketing 31 ABOUT ETHANOL Ethanol is a 100% renewable fuel, distilled from high- starch crops, primarily corn, in the U.S. Slunecka reports Standard Oil began using ethanol as a gasoline additive in the 1920s, and a decade later some 2,000 stations in the Midwest were selling blends of ethanol. But following World War II, the industry fell on hard times; virtually no ethanol was commercially avail- able until 1975, when the U.S. started to phase out leaded gasoline. Once again, ethanol came into use as a gasoline additive, to boost octane. The 1980s were difficult years for the industry, he says. Low prices for the renewable fuel caused many plants to shut down. But in 1988, the industry rebounded when ethanol began to be used as an oxygenate in gasoline. Today, ethanol is a mainstay at filling stations across the country. Most ethanol sold in the U.S. is called E10, a blend of 10% ethanol and 90% gasoline, but E85, a blend of 85% ethanol and 15% gasoline, is available for use in flex-fuel vehicles. "Ethanol is proving itself on the racetrack, too," Slu- necka says. "It's fast becoming the official fuel of American racing. Major racing sanctioning bodies like the IndyCar Series switched to 100% fuel grade ethanol in 2007. "As the industry continues to grow, it has become a critical component of our nation's overall energy security strategy," he says. "In 2005, U.S. ethanol production dis- placed about 170 million barrels of imported crude oil, valued at $8.7 billion, from reaching U.S. shores." CURRENT STATE OF AFFAIRS Two years ago, President Bush signed into law the Renewable Fuels Standard (RFS) legislation that required, starting with 4.0 billion gallons in calendar year 2006, nearly doubling to 7.5 billion gallons the amount of renewable fuels to be used by 2012. In short order, the ethanol industry built new plants and ramped up pro- duction to the point where, today, it has already achieved the capacity set by the mandate. However, because blenders apparently are only pur- chasing the amount required by the RFS mandate, ethanol prices have softened considerably and are presently at break-even for most manufacturers. As a result, construction of some ethanol plants have been halted and some that were on the drawing boards are not being built. In addition, the product has been at the center of a food versus fuel debate, principally instigated and publi- cized by food and oil companies, industry insiders report. "Every new industry has its growing pains," Slunecka responds. "Unfortunately, that is what the ethanol indus- try is currently facing." But that is also why it is a critical time for ethanol supporters to stay true to the cause and continue to tell the positive aspects of the product. "All product selection is based on the consumers' choice," Slunecka says. "If they have had a good experience with a product, they will discount the bad press. So, despite the critics, I think the product and the industry has a bright future. "Ethanol is environmentally friendly, good for the economy, and makes the U.S. less reliant on imports from countries who are not necessarily our friends," he says. Adding it all up makes ethanol a much needed product, one fittingly suited to be named AgriMarketing maga- zine's 2007 Product of the Year. AM TEN LARGEST ETHANOL MANUFACTURERS Current Under Company/ Construction/ Headquarters Annual Capacity Expansion # Plants (Mill of Gal) (Mill of Gal) POET 26 1,110 375 Sioux Falls, SD ADM 7 1,070 550 Decatur, IL VeraSun Energy Brookings, SD 8 450 440 U.S. Bioenergy St. Paul, MN 8 300 400 Hawkeye Renewable Ames, IA 4 220 100 Aventine Renewable Energy Pekin, IL 2 207 226 Abengoa Bioenergy St. Louis, MO 4 198 0 Global Ethanol Lakota, IA 2 152 0 New Energy Corp. South Bend, IN 1 120 0 Global Grain Energy Mason City, IA 1 110 0 Source: Renewable Fuels Association, October 12, 2007
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