September 18, 2019

Biofuels: Higher Prices & Trade Angles, However, Exports and Doha Still Important Considerations for U.S. Farmers

The September 2007 issue of Amber Waves, a publication from USDA’s Economic Research Service, contained two particularly interesting articles; one discussed ethanol and biofuels, while the other provided a detailed look at agricultural exports and imports.

The ethanol article, “U.S. Ethanol Expansion Driving Changes Throughout the Agricultural Sector”, which was written by Paul C. Westcott, stated that, “The explosive growth of U.S. ethanol production is being felt by nearly every aspect of the field crops sector—domestic demand, exports, prices, and the allocation of acreage among crops—as well as the livestock sector, farm income, government payments, and food prices. Additionally, issues have been raised regarding possible effects on natural resources resulting from the ethanol expansion and changes in farmers’ cropping choices. Adjustments in the agricultural sector to this strong demand are underway and will continue as interest builds in renewable sources of energy to lessen dependence on foreign oil.”

With respect to ethanol production, the article explained that, “With completion of the plants currently under construction, production capacity in the industry will exceed 12 billion gallons within a few years. Ethanol production is expected to be well above the renewable fuel standard mandated in the 2005 Energy Policy Act. Although the ethanol expansion is then expected to slow somewhat, even with the industry operating at less than full capacity, USDA’s 2007 long-term projections show ethanol production growing to more than 12 billion gallons by the middle of the next decade, assuming no changes in policy or technology.” (See this chart from the article, “U.S. ethanol capacity growing rapidly.”)