Corn overhang: Some solutions for increasing supply and reducing demand

Sugar cane can be processed to extract high fructose corn syrup, but the majority of sugar cane needs to be made into ethanol — unless you prefer sweet stuff and not sour.

The primary use of sugar cane is to make ethanol, which can then be converted into energy through use as a fuel for a combustion engine, or as a catalyst for a powerplant.

Ethanol is now a highly efficient fuel source. It runs 20-percent better than conventional gasoline and 30-percent better than biodiesel. (See How To Get Ethanol, Not Just Gas for more.)

Numerous industries have invested hundreds of millions of dollars to produce more ethanol, primarily in the United States. Ethanol prices are plummeting because of an oversupply created when it is produced domestically and because of an increase in imports from Brazil.

But the U.S. corn belt is one of the biggest consumers of ethanol. That hurts American farm communities and farmers who must compete with lower-cost Brazilian alternatives.

Between 2008 and 2015, the U.S. government subsidized hundreds of billions of dollars to private businesses to produce ethanol. The incentive has caused corn prices to plummet as farmers planted more corn than it was going to use for ethanol. Corn production declined and the demand for corn as an energy source decreased, while the prices of corn and corn products continued to climb.

Each year, the U.S. Department of Agriculture announces a new goal for ethanol production. The challenge is made more difficult because of the many mandates, supply and demand dynamics and an abundance of corn.

There are incentives to buy corn and build refineries that produce ethanol. Government policies that are intended to increase ethanol production have the unintended consequence of increasing corn prices and giving corn farmers in the U.S. a financial incentive to rip up and plant more corn.

There have been other unintended consequences of high corn prices.

When corn is planted, the land is planted with weed seeds, which the local corn farmers sell to the farmers who sell out of town. There are weeds in every state, but many farmers sell their fields to local farmers.

There are more tractor drivers. Tractor drivers are in high demand as well as agricultural property owners, who are able to lock out city or suburban farmers.

There are more buildings and houses. Most farmers have rental properties in their operation, including houses, mobile homes, sheds and storage buildings.

There are more Americans. Per capita agricultural land and acreage have decreased for about five decades. Farmers who have purchased land have only increased it by about one acre per year. It is one acre per city resident instead of one acre per farmer.

The increase in individuals moving to rural areas is pushing acreage prices higher, especially in the corn belt where farm fields now sell for $300,000 and up per acre.

Renewable Fuels Standard, the Renewable Fuel Standard, requires that the industry has to obtain a certain percentage of our energy from renewable resources. Part of that target is the production of ethanol from corn. The U.S. produces corn-based ethanol at about 1 billion gallons per year, and is committed to increasing production to 15 billion gallons per year by 2022.

It will likely take longer than a decade for the demand to outstrip the supply, and farmers to outgrow and plant more land to produce the required amount of ethanol. This could place significant pressure on corn prices.

Why don’t we simply move away from corn? Using sugar as a partial substitute is a viable option.

One of the most efficient forms of cellulosic ethanol is sugar cane, which can be processed to remove the sugar and leave only cellulose as a byproduct. Pure cellulose, though, is a very tough feedstock, much tougher than corn.

In the “steady state” scenario, ethanol produced from sugar cane will also create energy — but it will take a tremendous amount of work and technology to begin to eliminate some of the concerns that ethanol producers would face with corn.

How do we meet the demand of producing more ethanol and using cellulose as an energy source, with lower costs?

Culture — creating the will and the culture to make it happen. Cost — finding a way to not only use our corn, but also an efficient way to use sugar cane.

To reduce the consumption of corn, we need to reduce our demand for food. In addition, we can decrease our dependence on food by implementing cost-effective ways to heat and cool our homes. We can also reduce our food use by increasing food efficiency.

Leave a Reply

Your email address will not be published. Required fields are marked *