Earlier this week, the U.S. Department of Agriculture released its outlook for 2017 U.S. corn, with September production and yield estimates up slightly from August. Just after the report was released, corn futures declined.
While demand for corn has struggled to keep up with record-breaking yields, international market share for U.S.-grown corn has decreased with additional countries entering the market. These factors and more have led to struggling corn prices and tight margins for Minnesota farm operations.
Bill Hudson, principal and founding partner of the ProExporter Network, recently spoke with the Minnesota Corn Growers Association about future developments that could improve corn prices. For Hudson, a turnaround starts with increased ethanol demand.
The United States uses about 14.3 billion gallons of ethanol annually, while the rest of the world uses approximately 27 billion gallons. Hudson said there is potential for the latter to grow through the increased use of ethanol-blended fuels in foreign countries, even if those blends are as low as E1.
From a marketing standpoint, Hudson said both the octane and environmental benefits of ethanol-blended fuels are attractive internationally. Taking that into account, ProExporters predicts an increase of 3 billion gallons of ethanol used abroad by 2025, with the potential for much more dependent on the blend levels adopted by other countries. If it stays at three billion gallons, that would equate to another billion bushels of corn, according to Hudson.
Stateside, Hudson said the continued enforcement of the current Corporate Average Fuel Economy (CAFE) standards, which require an automaker to maintain a higher fuel economy, could lead to new engine technologies that would increase demand for mid-level ethanol blends.
High-compression engines that have the capability to use ethanol-blended fuel as high as E25 or E30 have been discussed by groups like the Ag-Auto Ethanol Alliance, members of which include automakers and biofuel producer groups. Even if CAFE standards are rescinded, Hudson believes high-compression engines are still attractive to automakers.
“People want to have big SUVs, but they don’t want to have to use so much gasoline,” Hudson said. “A substantial number of companies may go after this to make these kinds of cars more efficient.”
The Minnesota Corn Growers Association has worked with the consulting firm DeFour Group to move mid-level ethanol blends, specifically E25, into the marketplace. The multi-faceted approach included engine testing through the U.S. Department of Energy’s Oak Ridge National Lab sponsored by the National Corn Growers Association, optimization modeling for reducing emissions of Greenhouse Gases from Automobiles through Air Improvement Resources, Inc., and working through regulatory and policy topics with the EPA and other national agencies.
Interested in reading more about Minnesota corn farmer-funded efforts to increase ethanol use? You can find more on ethanol research, blog posts and events here.