Economics of ethanol

[grassfarmer]

Further to the debate on ethanol production recently I got this from ABP news on CanfaX:
Energy Balance for Corn – energy output:energy input = 0.8-1.34:1
So in fact it is possible to start up a subsidised biofuel industry that will be a net user rather than producer of fuel? At best it is a breakeven or very low volume producer of extra fuel. Where is the logic or reasoning in pursuing such a policy?

The reasoning seems to lie in the funding behind it - the Carlyle/Riverstone project is in line to receive up to $100 million per year in Alberta ethanol and biodiesel producer
credits, as well as being eligible for all the money available in the commercialization and infrastructure development program.
The distributors of the ethanol and biodiesel from this operation could receive over $75 million per year in federal tax credits.
Funny it doesn't mention how many million will be given to the primary producers who own and farm the land needed to produce this crop.

[cowman]

grassfarmer: I guess you aren't a believer in "trickle down" economics?
But believer or not, this thing is going to happen and in fact the Canadian taxpayer wants it!
Now we can butt our head against the wall and go tilting at windmills, or we can accept the fact and ask ourselves "whats in it for me"!
The fact is the Canadian farmer will benifit from this. And I agree so will the seed companies, fertilizer dealers, fuel agents, etc.
So will the employees of the plants, the suppliers, the spin off industries? I suspect a lot of research labs and people will as well?
Maybe the economics and even environmental results are all wrong...but it doesn't matter...because the conception that this is the right thing is already there! Canadians are suddenly thinking "green" and want to clean up their act. Now personally I think that is a good idea, but am not so naive to realize that a whole lot of "slickers" won't try to use that to feather their own nests! Al Gore, Stephane Dion, and all the "Kyoto boys" come to mind as a prime example! Just my opinion.

[farmers_son]

There is some interesting information on ethanol at:

http://en.wikipedia.org/wiki/Ethanol_fuel

I particularly noted this statement:

Environmentalists have objections to many modern farming practices, including some practices useful for making bioethanol more competitive ("factory farming"). If more third-world land were to be converted to agriculture to feed ethanol fuel demand, there is the possibility of trading today's automotive pollution for tomorrow's farm pollution.

The U.S. is promoting corn as a source of ethanol and are putting out the numbers that suggest corn can produce 1/3 more energy than is consumed in production. I would wonder if these calculations consider soil depletion.

Brazil is already the world’s largest source of ethanol, half its sugar can production goes towards ethanol production. In Brazil cars run on 100% ethanol. Although the focus in North America is on the subsidies being provided to large companies to construct ethanol plants in the U.S. the other side of the equation is the tariffs that the U.S. has in place on imported ethanol because ethanol could be imported from Brazil at a lower net cost. These tariffs amount to $0.57 per gallon of ethanol.

http://www.iowafarmbureau.com/programs/commodity/information/pdf/Trade%20Matters%20column%20050714%20Brazilian%20et hanol.pdf

The U.S. government can effectively manage the U.S. ethanol industry and the underlying corn price by varying the tariff on Brazilian ethanol. Any benefits to the primary producer, if any, today and tomorrow will depend upon government policy both here in Canada and certainly in the U.S.

[Horse]

Boy I sure would like to know who is telling the truth and who is fudging the figures. I have read everything that I see on ethenol and biodiesel and suposidly by intelegent and knolegable people and there sure as hell is no clear consensus , every one seems to have valad points but it seems at best this idea is barley workable and at worst it is a colosal waste of time and resources.
If anyone has the real skinney please let me know.

[ruggb]

Horse:

Amen - me too

Surely it can,t be that hard to figure out

[grassfarmer]

No Cowman i'm still waiting for you to convince me of the benefit of the trickle down effect in the beef sector. Beef retailing at or near record prices, packers recording record profits and guys selling calves getting their lowest prices in what,15 years or so? Where is the profit trickling to?

[kpb]

grassfarmer, I have to think that cowman was surely having us on when he mentioned trickle-down economics. Since when has any of the profits in any food group trickled down to any producers? The only trickle down I've ever felt from the processors is that warm feeling on the back of my neck when someone above is emptying their bladder.

kpb

[cowman]

grassfarmer: That was supposed to be sarcastic?
I think what you said about the lowest prices in 15 years should be even longer? In 1987 we sold 612 lb. steers for $1.12...but that was a very good year! That was actually the first year we ever sold calves...the high price pulled them forward.
Not sure but I think 1995 was a tough year? Calves right around a dollar...but then barley was up to $4/bu.!
I think the rise in barley prices have really impacted the feedlot sector, but suspect they might be over reacting? Maybe not...I've never seen things so uncertain? Biofuel has thrown a whole new curve into the game!
If this biofuel thing is real and sustainable, I believe we are in for one of the biggest shifts we've ever seen in the cattle business? A big reduction in the cowherd, a lot of producers shifting out of cattle and into grains/oilseeds, perhaps compltelely different genetics, and basically the end of the fall weaned calf market?
It will take time to sort it all out and see where the cards fall?
Incidently I did not sell any calves this fall. Probably the wrong thing to do? Feeding them fairly tough and out on grass next spring and hope like hell there is a bumper crop and someone still wants to feed cattle next fall! It sure was easier when we could just haul them off the cow and take them to town...but times change and we were moving to a yearling system anyway.
One old boy asked me last week if I'd sold my calves? I said "Nope I haven't lost enough on them yet! My stratedgy is not to have to pay any income tax on them!" LOL

[kato]

Things are going to change, that's for sure. My deepest gut reaction to the ethanol is that there is something fundamentally wrong with the concept of taking food off the market and using it to run vehicles.

There are so many other things that can be done first. How about parking the SUV's? How about putting the funding into more fuel efficient vehicles? How about finding alternate methods of heating our houses, like geothermal or solar? Hey, even bring back the rail service to a proper standard and park a few million transport trucks? We might even get our roads to last a bit longer.

To simply divert food into running vehicles without trying to cut energy consumption just doesn't sit well with me. All those millions of dollars spent, and are we going to be any further ahead in the long run?

[dalek]

Everything I've seen says that corn for ethanol is only a 5-10 year interim measure until other ethanol sources are developed. That's why most of the new plants are being built as flexible as possible.
Meanwhile people are bidding land rents up to over $300/acre to grow corn for ethanol.

[cowman]

There is a lot of research going on with various grasses? Switch grass is the most popular because it has a natural polymer...which could result in a bio plastic? There is also research going on about splicing this gene into other grasses?
Corn, wheat, maybe barley are not the end of the game...only the start? But you have to start somewhere? Canola might not be the best oil for bio deisel...hemp looks even more promising? But again you have to start somewhere? And all these products will replace food production!
I have been involved(in a very small way) in a bio gas project. It is truly amazing how fast the technology is advancing...and prices coming down? A farmer east of Red Deer is starting construction of a small plant this spring and it is quite innovative and cost effective! He is not chasing the electricity market but will be producing scrubbed methane gas right into the NOVA pipeline!

[brian99]

Guys, I don't think it matters whether this thing makes sense or not. The US government wants ethanol. I think oil security comes into play here. Yes, corn based ethanol is corrosive (sugar and cellulose based ethanol aren't), but where else are you going to find 10bbu of anything for these plants?

I kind of think it's like the first pacemaker. The patient didn't live long and it cost a fortune. Look at where we are now. There is nothing to say we won't switch to grasses as fuel for methyl-etheyl keytone something or other. I'm hearing now ethanol runs better (equivalent to gasoline) at 15:1 compression. Research is going on with ethanol/biodiesel blends. We are just starting this bus, and it will help crop prices in the short term, and Martha says thats a good thing.

[cowman]

You got it Brian!