US Ethanol Producers Respond to High Corn Prices, Foresee Rebound

US corn prices soared to record highs because of low production output in 2012 causing many bioethanol plants to temporarily halt production as profitability declined. US corn production dropped because of drought last year in many areas and shortage in feedstock supply has forced the prices to increase.

As corn feedstock remains scarce, many ethanol producers are turning to alternative raw materials such as wheat and sorghum in order to meet the increasing demand for ethanol, which is blended into gasoline fuel. The use of sorghum as alternative or supplemental feedstock is becoming more attractive among ethanol producers because of its status as an advanced biofuel feedstock given by the Environmental Protection Agency and the financial incentives that go with that.

However, US biorefiners are carefully weighing the pros and cons of corn alternatives. For example, mixing large amounts of wheat into corn at a plant dedicated to corn feedstock may be costly in the long run as this requires some operational adjustments as well as changes with some components such as enzymes and yeast. Some producers cite the potential loss of revenue from corn value added co-products such as corn oil as one of the economic considerations.

Economists at the University of Missouri-based Food and Agricultural Policy Research Institute (FAPRI) announced that if good weather continues this year, a record 2013 corn production, lower corn prices and significant rebound in ethanol output are to be expected. While ethanol production declined in 2012/13, domestic demand is slightly changed with increased imports and reduced exports. FAPRI predicts that ethanol use will exceed the 10% blend wall. More users are encouraged to use higher-level blends because of rising value of Renewable Identification Numbers (RINs), certificates that demonstrate mandate compliance.