Start Date

2-12-2004 12:00 AM

Description

The ethanol industry has quickly risen from obscurity to become a major user of U.S. grain. Corn consumption by ethanol processors will soon be 1.6 billion bushels or 16% of U.S. supply when plants under construction begin processing within the next year. In other words, about the same amount of corn is used for ethanol processing and exports. Iowa has shared importantly in the processing expansion, maintaining about a 30% share of national processing capacity throughout the last three decades. Accordingly, the ethanol market review and analysis of growth prospects in this paper may be useful to those who are not thoroughly familiar with this new market. First, we discuss the competitive role of ethanol in the gasoline additives market, emphasizing the role of U.S. Clean Air policies. Second, we present some baseline projections of the demand for ethanol, discussing the influence of possible policy changes, MTBE bans and renewable fuel standards, on the ethanol outlook. Third, we review developments external to the ethanol industry could cause major changes in the ethanol outlook. Lastly, we document the profitability record and discuss the sources of variability in ethanol returns. In this fashion, more informed decisions about participation in this important new market may be made.

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Dec 2nd, 12:00 AM

Ethanol Industry Outlook

The ethanol industry has quickly risen from obscurity to become a major user of U.S. grain. Corn consumption by ethanol processors will soon be 1.6 billion bushels or 16% of U.S. supply when plants under construction begin processing within the next year. In other words, about the same amount of corn is used for ethanol processing and exports. Iowa has shared importantly in the processing expansion, maintaining about a 30% share of national processing capacity throughout the last three decades. Accordingly, the ethanol market review and analysis of growth prospects in this paper may be useful to those who are not thoroughly familiar with this new market. First, we discuss the competitive role of ethanol in the gasoline additives market, emphasizing the role of U.S. Clean Air policies. Second, we present some baseline projections of the demand for ethanol, discussing the influence of possible policy changes, MTBE bans and renewable fuel standards, on the ethanol outlook. Third, we review developments external to the ethanol industry could cause major changes in the ethanol outlook. Lastly, we document the profitability record and discuss the sources of variability in ethanol returns. In this fashion, more informed decisions about participation in this important new market may be made.

 

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