Broadening the distribution of E15 could impact northern Colorado farmers
April 26, 2012
When the federal government announced earlier this month it had taken a step toward wider distribution of gas mixed with 15 percent ethanol, many were paying attention in northeastern Coloroado – where the hundreds of corn growers would be called upon to supply the extra grain needed and large-scale livestock feeders would be in competition for that corn, while ethanol producers are left looking forward to the doors that could open in the future from such a move.
On April 2, the Environmental Protection Agency moved to allow manufacturers to register as suppliers – what industry experts, according to Associated Press reports, regard as the EPA’s most significant move in a three-year effort to get E15 approved for the market.
Currently, most ethanol fuel sold for passenger vehicles is 10 percent ethanol and 90 percent gas, but, with this move, E15 could be for sale as early as this summer in some parts of the country (The new blend that boosts ethanol to 15 percent would only be sold for use in 2001 and newer vehicles, according to reports).
E15 still has a ways to go, however, as it must clear another set of federal tests and become a registered fuel in individual states – ethanol makers then must convince petroleum marketers to sell it at gas stations.
But the sudden increase in ethanol production that would come with wider E15 distribution in the near future would have implications in places like northeastern Colorado, if it all comes to fruition.
Affected, among others, would be corn producers, who in Weld County, collectively plant about 130,000 acres of the crop each year – third most in the state.
Recommended Stories For You
Corn growers look to benefit from the increase in demand for corn, needed to produce the approximately 7 billion more gallons of ethanol annually that could come as part of the move toward wider E15 distribution in the U.S. Currently, about 15 billion gallons of ethanol are produced each year.
As a result, they would also see the price for their commodity on the rise again, according to some agriculture economists, including Stephen Koontz at Colorado State University.
To what extent, though, is tough to predict, Koontz added.
Corn prices have come down from their record highs of about $8 per bushel, where they stood at last summer, thanks to more and more corn being planted in the U.S. Because the crop has been so valuable, more corn has been planted each year – nearly 96 million acres this year, the most since 1937 – and that large supply has brought down the value of the commodity.
But with the increased demand for corn to produce more ethanol for E15 distribution, those prices could stop falling and start going back up down the road, Koontz said.
While E15 would mean good things for corn producers, it’s another story for the livestock industry, which, in Weld, consists of about 545,000 total cattle – by far the most in the state. Weld has some of the largest cattle feedlots in the nation and a rapidly growing dairy industry – Weld ranked No. 3 in the value of all livestock and their products, with about $1.26 billion in products sold, according to the most recent U.S. ag census.
About 70 percent of the diets for those cattle can consist of corn or distiller grains from ethanol production, according to Steve Gabel of Eaton, operator of Magnum Feedyards. Many cattle feeders use corn in their rations, because it produces more marbling and cattle can reach slaughter weight at a faster rate.
Profit margins are already tight for cattle feeders, Gabel and others in the industry say. They’re already paying record-high prices to bring cattle into their feedyards – since the U.S. beef cattle herd is in very tight supply, due to the historic drought in Texas last year and other factors – and are then they’re paying high prices to feed the animals – with commodity prices so high.
In the end they’re having difficulty selling their fed cattle to slaughter at a high enough price to make much money, if any at all.
With this year’s historically large U.S. corn crop, cattle feeders were expected to possibly see a bit of a break at last in prices for feed. But the ethanol industry’s increase in demand for corn, if E15 becomes more widely produced and distributed, would cancel that out, some worry.
“We’re already stuck in a tough situation,” Gabel said. “And watching more corn go into ethanol in the future isn’t going to help us.
“The ethanol process, as far as I’m concerned, is inefficient thus far, and doesn’t warrant the hardships we face … or the government support it’s getting.”
But Mark Sponsler, executive director for the Colorado Corn Growers Association based in Greeley, and Dan Sanders Jr. with Front Range Energy in Windsor, believe ethanol is worth the government’s investment.
Both have both been pushing for the move to E15 for the past couple years and have said the move toward E15 will further help in reducing America’s dependency on foreign oil, and also open the door for second-generation and cellulosic biofuels.
Sponsler added that already ethanol use in gasoline is estimated to make gas 89 cents cheaper at the pump.
Sanders noted that the EPA’s recent move wouldn’t have an immediate impact on Front Range Energy – they’ll continue producing about the same amount of ethanol in near future, he said, while gasoline companies will be responsible for the actual E15 blending – but said the company could see some expansion in the future when those second-generation and cellulosic biofuels are more feasible to produce.