Corn growers in Illinois have released a study they commissioned on the land use effects of ethanol plants. The growers wanted to counter the argument that demand for ethanol as a fuel additive was changing land use patterns, causing more land to be converted to corn growing for fuel and diminishing the amount of land dedicated to food crops.
The study was conducted on a single plant in Illinois, beginning a year before the plant opened and continuing for two years after it commenced operation. Farmers did not convert land to corn growing, even though land was available to do so. Demand for corn to supply the new plant “was quickly met by incremental production improvements.” According to the researchers, increased percentages of land used to grow corn around the plant was merely coincidental. Or, at most, a short-term move by local farmers to take advantage of what they all perceive to be a windfall.
Ethanol has really fallen off an investor’s radar screen due to the failure of Verasun and the low share prices for other publicly-traded suppliers. But for independent co-operatives and local ad hoc organizations of growers, ethanol and its government subsidies can be an important source of additional income because it moves growers a bit further up the value chain, where profits are generally higher.
Until there is a widely used replacement for gasoline as a motor fuel, the US is likely to have to live with ethanol. And the subsidies that go with ethanol will go more to farmers, not investors. Once the ethanol subsidies become entrenched in US agricultural subsidies, it’s safe to assume that ethanol will be with us for a long, long time.
Paul Ausick
February 24, 2009
Top Gaining Stocks
Top Losing Stocks