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Ethanol production Ethanol production in 2006 through May has been running at an average of 12.4 million gallons per day. As additional facilities come on line, production is expected to rise steadily throughout the year and total 4.9 billion gallons for the year. While there is significant euphoria about the current and future prospects for ethanol, there are risks in the outlook. The major uncertainty is how the market will evolve over time if production of ethanol stays above the levels mandated by the RFS. There is no requirement for use to rise above 7.5 billion gallons at this time, and for use to exceed 7.5 billion gallons, ethanol must be competitive in the market place. A combination of declining gasoline prices, sharply rising corn prices, or a decline in the premium ethanol has to gasoline prices could curtail the ethanol production expansion. An issue that has gained much attention as ethanol production has expanded is the implication for animal feed supplies. While corn used for ethanol does not go directly to animal feed, key ethanol coproducts are animal feeds. About 17 pounds of distillers dried grains with solubles (DDGS) with 13 percent moisture are produced per bushel of corn used for ethanol. Distillers grains are sold one of three ways: wet distillers grains (WDG) with 67 percent moisture, modified distillers grain with 50 percent moisture, or dry DDGS. Generally, dairy feed rations can include up to 40-45 percent DDGS and fed cattle rations can include up to 35-40 percent DDGS. Monogastric poultry and hog rations can include up to 5 percent DDG. DDG include 10 percent fiber that can not be digested by poultry and hogs. On a nutrient basis, one pound of DDG is equal to about one-half pound of corn and one-half pound of soybean meal. About one-third of the corn used in the production of ethanol is available as a feed in the form coproducts feeds from wet and dry mill ethanol plants. The Current Biodiesel Market. Biodiesel, which is just beginning to establish a market in the United States, is a biofuel substitute for petroleum diesel. The majority of biodiesel in the United States is made from soybean oil (estimated at over 90 percent), but a few producers use other oilseed crops, palm oil, animal fats and recycled oils to make biodiesel. Biodiesel can be used in most diesel engines, with little modification. Because it has similar properties to petroleum diesel fuel, biodiesel can be blended in any ratio with petroleum diesel fuel and is most often blended at the 20 percent level (B20). Today, most B20 is used by government motor fleets, urban bus fleets, and school buses. It is also been used in farm equipment, marine engines, and furnaces as a replacement for heating oil. The trucking industry has recently showed interest in using biodiesel and B20 is being offered at some truck stops. |