The ethanol industry exploded in the late 2000s, as plants sprang up across the country and gobbled up billions of bushels of corn. Now almost two decades after the original renewable fuel policy was passed, the industry looks much different. With the popularity of electric and hybrid vehicles growing, long-term gasoline use could drop, taking ethanol consumption with it. Will ethanol continue to be the juggernaut in the corn market? Aside from how policy will impact the industry (it always does), here are some major trends at play.
Electric Vehicles: Small but Growing in Market Share
Many automakers have announced they are shifting away from internal combustion engines. For instance, General Motors set a 2035 target to stop selling vehicles powered by gasoline or diesel.
While on the surface these announcements are concerning for ethanol, Matt Roberts, senior grain and oilseed analyst at Terrain, says farmers must look at the fine print.
The first factor is how fast new electric vehicles can displace the current fleet. “The average age of a passenger car in America is 13.1 years, and it’s been increasing for the last decade,” Roberts says. “New cars are expensive, so people keep cars longer, and those cars still burn gasoline.”
Also, plug-in hybrid electric vehicles use liquid fuels or grid power. “Studies show 60% of the time those vehicles are operating on gas,” he says. “So, when we put this all together, we’re talking about a 1% to 3% decline in corn demand by 2035. The consequences are going to be small.”
Just how fast are electric vehicles replacing gas powered cars? How will that impact the ethanol industry? It’s just one of the economic questions we consider with an organization working on a number of farm economic indicators. Listen to this episode of Farming the Countryside:
