Like right now, the industry is pushing EPA to sign off on higher blends of ethanol into gasoline. Currently the cap is 10 percent.

Why do they want higher blends approved? Simple. Ethanol is more expensive than gasoline right now.

According to the America Coalition for Ethanol, for December 3, 2008, the average rack price - or wholesale price - of ethanol in Nebraska is $1.81 per gallon. In South Dakota it is $1.80. That is equal to the national average RETAIL price of gasoline released by the US Department of Energy on December 1, 2008.

On the futures markets, … ethanol opened trading today at $1.53/gal, while RBOB Gasoline, the reformulated gasoline with which ethanol is mixed, opened trading today at $1.01/gal.

Unless they get higher blends mandated, … gas prices will remain low.

by Peter Shinn

The Daily Livestock Report published by the Chicago Mercantile Exchange on Tuesday noted troubling evidence of cattle herd liquidation. The report’s author’s, livestock economists Steve Meyer and Len Steiner noted an increased pace of cattle slaughter this year amid steadily climbing feed costs.

“Despite high cow slaughter rates in 2006 and 2007, current cow slaughter remains well above year ago levels,” the Report said. “Weekly beef cow slaughter in April was an average 10.4% higher than the already high levels of a year ago and 21.7% higher than the 2003-07 average.”

DTN Chief Livestock Analyst John Harrington agrees with that assessment. Harrington told Brownfield Wednesday the slowly dwindling U.S. cattle herd hasn’t yet fully translated into higher costs to consumers. And when that happens, Harrington suggested the entire dynamic of beef consumption in America could change.

“Beef may become very expensive and something you eat relatively rarely and more likely in a restaurant than anyplace else,” Harrington said. “I’m not predicting that, but certainly that’s a concern.”

But Harrington has a bigger concern. He pointed out the average age of beef producers is getting older, not younger, reducing the incentive to ramp production back up even when prices do improve.

“It’s a very difficult decision for many of these guys to say, “Well, you know, I’m going to expand the herd. Oh, yeah, Junior doesn’t want to come back. I can’t find any help. So what am I thinking of? I’m closer to retirement than anything else.’” Harrington explained. “So this is the factor that I think we kind of have to struggle with.”

As for the possibility of big future beef demand increases, Harrington emphasized the most potential still lies overseas. And he noted sanitary and phytosanitary trade barriers still limit opportunities for U.S. beef in that arena.

“We’ve got to continue to grow that foreign market, and as you know, that’s been kind of difficult,” Harrington said.

The tendency of all entitlements is to grow. Will corn farmers and corn ethanol producers remain content with 15 bn gallons if, as 2015 approaches, they find they can produce many billion gallons more? The corn-ethanol lobby is not exactly noted for its self-restraint. I’ll be shocked if the lobby doesn’t lobby to raise the ceiling. 

USDA FORUM: Corn Ethanol Can Eventually Go Over 15B Gallons
February 22, 2008
By Bill Tomson
DOW JONES NEWSWIRES

  ARLINGTON, Va. (Dow Jones)–Rising corn yields and improved ethanol
technology will, in the long-run,  push U.S. production capacity for the fuel
up above a commonly perceived ceiling of 15 billion gallons per year, National
Corn Growers Association Chief Executive Rick Tolman said Friday.

  Tolman, in an interview with Dow Jones Newsires, said the commonly cited
ceiling doesn’t really exist. By the year 2020, farmers could be getting corn
yields of as much as 300 bushels per acre — about double what they are now –
and refiners could be getting as much as 1,000 gallons of ethanol from an acre
of corn — about double what is being taken now.

  With all that corn, Tolman said, refiners could push production to more than
20 billion gallons a year without depriving the livestock feed and food
industries of the corn they need.

  U.S. Department of Agriculture Under Secretary Thomas Dorr, speaking to Dow
Jones in a seperate interview at USDA’s annual Agricultural Outlook Forum,
agreed that the production of corn-based ethanol could eventually rise above 15
billion gallons per year.

  A new renewable fuels standard approved by Congress and signed by President
George W. Bush in December calls for 36 gallons of renewable fuel production in
the U.S. by 2022. Of that 36 billion gallons of renewable fuel, 20 billion
needs to be cellulosic ethanol, 15 billion needs to be corn-based ethanol and 1
billion is mandated for biodiesel. The corn-based ethanol deadline is 2015.

  Meeting that deadline for corn-based ethanol, Tolman said, will be easy. He
was uncertain about the ability of the U.S. to produce cellulosic ethanol.

  But USDA’s Dorr said he was confident that rapidly improving technologies
will assure that cellulosic ethanol production will be up to meet the
challenge.

  Most of the renewable, agriculture-based fuel called for in the new
government mandate will have to come from cellulosic material and the process
to produce it is not yet commercially viable. Research is making impressive
strides, though, according to Dorr and other USDA officials.

VeraSun suspends construction in Indiana

By Staff Reports
Argus Leader
PUBLISHED: October 1, 2007

VeraSun Energy Corp., one of the nation’s largest ethanol producers, today announced that it will suspend construction of its 110 million-gallon-per-year ethanol biorefinery in Reynolds, Ind., due to weak market conditions.

The company expects to resume construction in 2008.

“We believe it’s important to be mindful of the current market conditions and manage our business accordingly,” said Danny Herron, VeraSun Chief Financial Officer and Senior Vice President. “Given the abrupt change in market conditions that have seen ethanol prices drop nearly 50 cents per gallon in the last 60 days, it is prudent for us to adjust our current pace of expansion. Due to Reynolds’ early stage of development, we believe it is wise to suspend investment until the market provides an acceptable return.”

VeraSun originally announced plans to build the Reynolds facility on April 18, 2007, and completed site grading and preparation work in August. VeraSun continues to expand its business with four facilities under construction in Hartley, Iowa, Welcome, Minn., Albion, Neb., and Bloomingburg, Ind.

“We have a large business that we are growing rapidly with four facilities continuing under construction,” said Don Endres, VeraSun Chairman and CEO. “We remain confident in the outlook for our industry and believe that with ethanol currently priced at a dollar less than gasoline, it provides a great value as a high-octane, clean-burning renewable fuel that will drive additional blending throughout the nation.”

WASHINGTON, Jun. 29, 2007 - U.S. farmers planted 92.9 million acres of corn in 2007, exceeding last year’s planted area by 19 percent and surpassing the March projection by 3 percent, according to the Acreage report released today by the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS). The actual planted acreage is the highest since 1944, when farmers planted 95.5 million corn acres.

Driven by favorable prices, growing ethanol demand and strong export sales, farmers in nearly all states increased their corn acreage. They set state records in Illinois, Indiana, Minnesota and North Dakota, while Iowa continued to lead all states in total corn acres.

The increase in corn is offset mainly by fewer acres of soybeans in the Corn Belt and Great Plains, and fewer acres of cotton in the Delta and Southeast. Nationwide, NASS estimates planted soybean area at 64.1 million acres, down 15 percent from last year’s record high and down 5 percent from the March forecast. Area planted to cotton totals 11.1 million acres, marking a 28 percent drop from 2006 and the lowest level since 1989.

The Acreage report shows that the nation’s farmers continued to embrace biotechnology. Corn growers planted 73 percent of their acres with biotech seed varieties, an increase of 12 percent from 2006. Cotton farmers planted 87 percent of their acres with biotech varieties, up 4 percent from 2006, and soybean producers planted 91 percent of their acres with biotech seed, up 2 percent from 2006.

NASS’s acreage estimates are based on surveys conducted during the first two weeks of June on approximately 11,000 segments of land and from a sample of approximately 88,000 farm operators across the United States. Acreage and all other NASS reports are available online at www.nass.usda.gov.

• “OPEC has nothing to fear. Even in the most optimistic scenarios, the contribution from biofuels would be very small,” Claude Mandil, head of the International Energy Agency, told the Financial Times
• Mr Mandil said that even in the worst case for Opec, in which consuming countries implemented policies to curb oil consumption, the IEA forecast that global oil demand in 2015 would rise by close to 10m barrels a day, to 94.8m b/d.
• The potential of the current generation of biofuels is severely constrained by the competition with the food industry for feed stocks such as corn and wheat.
• Even if there is a breakthrough to those “second-generation” biofuels, Wood Mackenzie, the consultancy, estimates they might displace only up to 4 per cent of world oil demand in the next decade.

To achieve that mark, more than 550 million bushels of corn, or roughly 25% of Iowa’s 2005 harvest, were processed in Iowa’s refineries, the latest of which came on-line in December. As of December, there are 26 refineries in operation with an annual capacity of 1.7 billion gallons; expansion of existing facilities and construction of new plants are expected to add an additional 1.4 billion gallons in 2007.

According to the Renewable Fuels Association, … Iowa now produces about one-third of all of the US renewable fuels, and that is growing. 

Let’s hope there’s not too much rain in May, or not enough in July in Iowa - or their corn crop, and our motor fuel, will disappear.