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Is USDA Too Bullish on Ethanol?

July 1, 2010
By: Jeanne Bernick, Top Producer Editor

In an effort to “recharge America,” USDA announced this week it is developing a regional strategy to help achieve the U.S. Renewable Fuels Standards (RFS2), which mandates the American economy will use 36 billion gallons of renewable fuel per year by 2022.

USDA says it will focus on alternative feedstock fuels because the corn ethanol industry is “well on its way” to reaching the RFS2 limit of 15 billion gallons by 2022. The expectation for 2010 is for the U.S. to produce approximately 12 billion gallons of ethanol.
Some say USDA is too bullish on ethanol. The Department already has surprised the market by lowering ending stocks for corn in both 2009 and 2010, citing an increase in ethanol use.
“While most agree ethanol use of corn will remain solid, some analysts question whether it will reach the levels currently projected by the USDA,” says Melvin Brees, economist with the Food and Agricultural Policy Research Institute (FAPRI). 
Blend wall decision dampens market. Hopes for ethanol to pick up have dropped even further now that the Environmental Protection Agency has once again delayed a decision to boost the amount of corn-based ethanol that can be blended with conventional gasoline. The EPA said Thursday it will wait until fall to decide whether it will allow corn-based ethanol to be blended at a rate higher than the current 10% maximum.
"Every day they delay, the U.S. is sending more gallons of home-grown ethanol overseas while it's importing more petroleum," says David Weintraub, spokesperson for ADM, one of the nation’s top ethanol producers, with 1.8 billion gallons of ethanol capacity per year. ADM renewed its call for an interim increase in the ethanol blend to 12% to help ease the current glut of ethanol in the U.S. market caused by the E10 "blend wall."
In additional news, any initial approval of E15 will reportedly be limited to model year 2007 and newer vehicles, further dampening additional opportunities.

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RELATED TOPICS: Policy, Biofuels, USDA

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