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Role of Ethanol Seen as Balancing Act

by 5m Editor
20 October 2008, at 9:27a.m.

US - The president of Marquis Energy says that ethanol production is only one of several factors causing the rise in food prices.

Consumer Scott Kroll assumes production of ethanol means higher prices for eggs, milk and bread. "Gas prices will go down, but food prices will go up," said Mr Kroll of Oglesby. "One way or another, we're going to get slammed."

Those perceptions are something Mark Marquis wants to combat.

Mr Marquis, president of Marquis Energy, an ethanol plant in the Central Illinois community of Hennepin, understands why consumers blame ethanol for higher grocery bills. He does not deny ethanol has raised corn prices, but said it is the fourth reason down the list. He argues consumers would pay more for groceries without ethanol.

The biggest factor in rising corn prices is the devaluation of the American dollar that actually makes corn prices attractive to foreign buyers, Mr Marquis said. Investors who have switched to putting money into commodities and more demand from emerging markets like Asia also have contributed more to higher corn prices, he said.

Without ethanol's contribution of 9 billion gallons to the 140-billion-gallon fuel market, more demand for less product would push gasoline prices up, he said. American drivers save up to 40 cents per gallon of gasoline because of ethanol, according to a study from Iowa State University's Center for Agriculture and Rural Development.

Customers would pay more at the grocery store, too, Mr Marquis said, since transportation costs to get products to the shelves also would be even higher.

Another issue the ethanol industry is up against is demand for livestock feed. Some argue ethanol's entry into the corn market has taken grain away from the export and livestock markets, increasing competition for the crop and raising prices.

But farmers also have planted more acres of corn and yields continue on an upward trend, which adds to the available supply that ethanol production has tapped, Marquis said. Nationwide, farmers produced 13.1 billion bushels of corn in 2007, beating the previous record of 11.8 billion bushels in 2004, according to the U.S. Department of Agriculture's National Agricultural Statistics Service.

"It isn't like we've drained the corn supply," Marquis said.

Marquis also hears talk that it takes more energy to make ethanol. But ethanol has come a long way since some old studies, he said.

The industry continues to invest in efficiency and technology, said Dave Loos, director of technology development for the Illinois Corn Growers Association in Bloomington.

For example, a bushel of corn makes more ethanol and less water is needed for production nowadays, he said.

Researchers also are working on technologies that would mean ethanol's byproduct -- the dried distillers grains -- would have a higher value as feed for the livestock industry, Loos said. Right now, that feed product is best for beef and dairy cattle, and less so for hogs and poultry.

5m Editor