Ethanol makers shift effort to demand side of ledger

Emmetsburg, Ia. — Now that its losses have ended, the ethanol industry needs the federal government to increase the amount of the corn additive in gasoline, industry leaders say.

A Dec. 1 deadline looms for the Environmental Protection Agency to allow the blend of ethanol with regular gasoline to increase from 10 percent to 15 percent.

Ethanol makers need that increase in the blend to continue the growth in demand for their product, some of which will be produced at Poet's $200 million corncob-fed plant, expected to open in 2011 in Emmetsburg. It would be Iowa's first plant to produce ethanol from biomass, or cellulose.

Poet Chief Executive Jeff Broin brought to the plant Wesley Clark, a retired four-star general, former NATO commander and onetime Democratic presidential candidate who now is head of the ethanol industry's newest advocacy group, Growth Energy.

"We want you to stand up and tell Washington that we need E15," Clark told about 250 farmers and implement dealers gathered in a chilly tent beside Poet's plant Tuesday. "If the EPA won't make the ruling, then Congress should do the job."

Broin told the crowd that "we need for you to make it happen. Let your congressmen know how we feel."

Broin and Clark were addressing ethanol's next big problem. Now that it has been relieved of the record high corn prices that drove several major ethanol producers into bankruptcy last year and this year, the industry faces the challenge of ramping up demand.

Ethanol production in the United States rose by 25 percent from February through August, largely because of the resumption of production at a number of plants shut down because of bankruptcy or supply problems.

In Iowa, ex-VeraSun plants at Albert City, Charles City, Fort Dodge and Hartley that were closed at the beginning of the year have been reopened by their new owner, Valero Energy of Texas. Two other plants at New Hampton and Grand Junction began operations last spring.

The reopening of the plants and at least an end to deep losses, if not a return to strong profits, have given the ethanol industry a more optimistic outlook.

"Things are better for the industry now," Broin said before the presentation. "I've been in this business for 20 years, and we've been through at least four major downturns."

Feedstock corn prices that averaged more than $5 per bushel last year have been under $4 for most of this year.

Wholesale ethanol prices have risen from an average of about $1.60 per gallon in Iowa during the first half of this year to $2.09 this week. Most of that gain has come on the coattails of the rise in crude oil prices by about $15 per barrel since September to $80 per barrel this week.

But that poses a problem, because unblended gasoline traded for $2.02 per gallon this week on the New York Mercantile Exchange. Blender demand for ethanol generally is higher when ethanol prices are lower than gasoline prices.

But because demand for gasoline is flat - up 2 percent from last year, well below the average increases of 3 to 4 percent that gasoline enjoyed at least until 2007 - ethanol makers face the problem of creating more demand.

"We need more demand for ethanol, and that's why we need E15," Clark said.

source: desmoinesregister