Research Examines Dependence on Ethanol

SDSU research associate Yonas Hamda’s article, “Dependency on the Ethanol Industry,” is included in a recent issue of the SDSU Economics Commentator. It’s available online at an SDSU Department of Economics Web site, http://econ.sdstate.edu/Research/Commentator/No503.pdf.

Hamda includes some discussion of domestic corn used for ethanol. The figures show that the top five states in ethanol production — Iowa, Nebraska, Illinois, South Dakota and Minnesota currently account for two-thirds of ethanol production capacity — are channeling a substantial share of their corn into ethanol processing.

About 60 percent of South Dakota’s corn went into ethanol production by 2007-08, the highest proportion of any state. In Iowa the figure was 50 percent; in Nebraska, 40 percent; and in Minnesota and Illinois, 30 percent.

The increasing rate of corn for ethanol use has affected the availability of corn for feed and exports.

Research in 2008 by SDSU economists Bashir Qasmi, Yonas Hamda and Scott Fausti suggested the share of corn going for ethanol production implies a heightened level of dependency of South Dakota’s agricultural economy on the industry.

In South Dakota 15 ethanol plants have the capacity to produce 874 million gallons a year — 9 percent of the nation’s ethanol producing capacity. The study by Qasmi, Hamda and Fausti found that three companies —VeraSun Energy, Poet, and Archer Daniels Midland Co. — owned 43 plants in the United States, with total capacity of 3.6 billion gallons per year, accounting for 36 percent of the nation’s ethanol production capacity in 2008. VeraSun filed for Chapter 11 bankruptcy in 2008.

As of September 2008, there were 165 ethanol plants in the U.S. with a total capacity of 9.9 billion gallons per year. National ethanol production is expected to soon reach 13.8 billion gallons per year due to expansion at five plants and construction of 34 new plants.