Exposing the U.S. Corn Ethanol Boondoggle
The U.S. Corn Ethanol Industry, the largest in the world, is now losing a serious amount of money producing unprofitable biofuel. While the situation for the ethanol producers was bad in 2018, due to losses stemming from falling margins, it’s even worse this year.
This has prompted one of the country’s largest ethanol producers, ADM – Archer Daniels Midland, to sell some of its ethanol assets with the possibility of spinning off its entire ethanol business operation.
While higher corn prices and falling revenues have negatively impacted the U.S. Ethanol Industry recently, that is only a small part of a much bigger problem. You see, the EROI (Energy Returned On Investment) for corn-based ethanol, is so low, there’s virtually little if any, net energy produced from the 16 billion gallons of the biofuel supplied by the U.S. industry last year… or any year prior.
IMPORTANT NOTE: Please understand my analysis of the U.S. ethanol industry is focused at the macro-economic level and is not directed at the individuals or companies who are doing the best to their abilities. The main problem as I see it is that the leadership today is not providing the market with wise advice on our energy situation. Instead, we are ignorantly heading over the energy cliff without a care in the world. Unfortunately, this will end badly
That being said, according to the Alternative Fuels Data Center, U.S. ethanol production has more than doubled from 6.5 billion gallons in 2007 to 15.8 billion gallons in 2017:
As we can see in the chart, the United States is by far the largest ethanol producer (Blue bars), followed by Brazil (Orange bars) at a little more than 7 billion gallons per year. The United States and Brazil account for 85% of global ethanol production.
Now, how much corn does the U.S. Ethanol Industry consume to produce nearly 16 billion gallons of its biofuel per year? Well, according to the information from the USDA (U.S. Department of Agriculture) and WorldofCorn.com, the Ethanol Industry consumed nearly 40% of the entire U.S. corn crop last year:
Of the total 14.4 billion bushels of the U.S. corn crop in 2018, the domestic ethanol industry devoured 5.5 billion bushels or 38% of the entire supply. So, how much land is needed for U.S. ethanol production?? The USDA states that the farming industry harvested 81.7 million acres in 2018 to supply that 14.4 billion bushels of corn. Thus, the U.S. Ethanol Industry needed 31 million acres of corn just to produce its biofuel last year.
How much land is 31 million acres?? That’s nearly 48,500 square miles. Thus, the Ethanol Industry needed the crop acreage of the following states total area to produce its fuel:
- Rhode Island
- Delaware
- Connecticut
- New Jersey
- Massachusetts
- New Hampshire
- Vermont
- Maryland (90%)
Actually, I was quite surprised how much corn the Ethanol Industry consumed to make its fuel. I knew it was a lot, but I had no idea. By the way, here is an interesting data point. The largest food component of the corn industry is not food or cereals; it’s High-Fructose Corn Syrup. Check out how much corn the Ethanol Industry consumes versus the Food and High-Fructose Corn Syrup Industries:
U.S. Corn Consumption 2018 (million bushels)
Ethanol Fuel = 5,515 million bushels
High-Fructose Corn Syrup = 455 million bushels
Food & Cereal = 209 million bushels
The U.S. Ethanol Industry consumed 12 times more corn than the High-Fructose Corn Syrup Industry and 26 times more than the Food & Cereal Industry. This data came from WorldofCorn.com. Pretty amazing… huh? And even more surprising, the number one consumer of corn in the United States is the Ethanol Industry (38%) followed by the Animal Feed Industry (34%). So, all you folks who thought the miles and miles of corn in the midwest were mostly grown for food, think again.
Now, it’s one thing for so much valuable farmland to be used for the production of fuel ethanol, but it’s even worse when the industry can’t turn a profit. As I mentioned at the beginning of the article, while 2018 was rough for the Ethanol Industry, 2019 is turning out to be a REAL BUMMER.
I am not going to get into too many details plaguing the U.S. Ethanol Industry, but one of the more recent factors is the rising corn prices due to the record rains and flooding in the midwest negatively impacting the corn crop. And along with falling Ethanol fuel prices, it has put a real KIBOSH on profits.
If we look at the data provided by the Iowa State University on their estimated “Net Returns” for the ethanol producer, we have the following spreadsheet:
It’s hard to read this chart, so I made a larger table from the insert above:
The highlighted area of the table provides an “estimated net return” per gallon for the typical ethanol producer in the United States. By including “ALL COSTS,” the folks at Iowa State, (Iowa is the largest corn ethanol producer in the country), calculated that the typical ethanol producer lost 27 cents per gallon in May 2019. That 27 cent loss per gallon includes paying debt.
Now, if we look at some of the financials by the Ethanol producing companies, we see evidence of mounting losses. For example, Green Plains Inc, the fourth largest ethanol producer in the U.S., reported a $42 million loss in Q1 2019. Furthermore, Pacific Ethanol, a smaller producer, recorded a $13 million loss during the same quarter. And, if we look at Pacific Ethanol’s stock trend over the past few years, it seems as if INVESTORS are quite unhappy with the company’s performance:
As we can see, Pacific Ethanol was trading near a high of $24 in 2014, but now is a penny stock at a mere 60 cents a share. While Pacific Ethanol might be a smaller producer, it’s $1.5 billion in total revenues last year wasn’t chump change.
Also, as I mentioned, ADM, the second-largest producer in the country, is also struggling. From the article, ADM Separates Ethanol Business:
The Archer Daniels Midland Company (ADM) is breaking news of breaking off their ethanol unit…and a tumbling 40% decline in profit.
…. According to Reuters, “Last week, U.S. ethanol production hit 1.05 million barrels per day, highest in at least five years seasonally, according to U.S. Energy Information Administration data. Inventories climbed to 22.75 million barrels, not far from the record of 24.45 million hit in March. Producers such as Green Plains (GPRE) and Pacific Ethanol (PEIX) have laid off workers and idled or sold plants to stay afloat during the sustained downturn. Ethanol prices are down 42 percent in the last five years, while Green Plains and Pacific Ethanol have seen their shares fall 33 percent and 92 percent, respectively, in that time.”
So, while we see real trouble for the U.S. Ethanol Industry as companies lay off workers, sell or idle plants to remain afloat, it’s only going to get worse. Why? Because the Ethanol Industry has one of the lowest energy EROI’s (Energy Returned On Investment) in the United States:
Corn-based ethanol fuel actually has a lower EROI than either Canadian Oil Sands or U.S. Shale Oil. If we look at the chart above, corn ethanol and biodiesel EROIs are tied for last place. Thus, by using higher quality EROI energy from oil, natural gas, and coal to grow, harvest, and produce the low-quality EROI corn-based ethanol fuel, the industry is basically turning GOLD into LEAD, while losing money doing it.
And, if that wasn’t bad enough, the huge increase in U.S. fuel ethanol production came on the back of rising shale oil production. Corn ethanol production in the United States remained relatively flat from 1990 to until the early 2000s. However, when U.S. shale oil started to ramp up in 2007, we see the same for ethanol production. Ethanol production jumped from 150 million barrels per year in 2007 to over 350 million barrels in 2016.
In an ironic twist of fate, the United States is trying to become energy independent by ramping up production of two of the lowest EROI fuels in the world. According to some studies, U.S. Shale oil has an EROI of 5/1 while corn ethanol is 1.2-1.5/1. Gone are the days in the 1930s when the U.S. oil industry was producing oil at an amazing EROI of 100/1.
Unfortunately, I see real trouble ahead for the U.S. Ethanol Industry… an industry that produces more than a million barrels of extremely low EROI ethanol fuel a year. When U.S. shale oil production peaks and declines, it makes perfect sense that domestic fuel ethanol production will also do the same.
Lastly, Zerohedge posted this article; This Is What Americans Spent The Most Money On In The Second Quarter, stating that Americans spent the most of their income in Q2 2019 on Recreational Goods and Vehicles… over $22 billion. This makes perfect sense. Americans are totally clueless about the coming economic calamity and are preparing by going further into debt by purchasing recreational vehicles so they can GET AWAY from the RAT RACE.
Years from now, we are going to look back at the Great U.S. Ethanol Boondoggle and why we wasted so much energy and capital producing one of the lowest EROI fuels in the world.
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FauxScienceSlayer
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ALL green energy systems (photovoltaic, wind, biofuels) are net energy losers, therefore unsustainable. The US has 79,000 tons of spent Uranium fuel rods that will be radioactive for millions of years, LWR is not sustainable. We’ve been lied to about everything, forever.
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jerry krause
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Hi Steve (srsroccoreport),
First, what I do not understand is if your reports are so valuable, why can you not market them so you will not have to beg for donations from readers of PSI. PSI furnishes platform for breaking science news articles for its readers. And to my knowledge you did not have to pay anything to get your scholarship posted here on PSI. To me it is not ethical to ask for donations on a site which relies on donations to furnish this service to its readers.
However, one thing I did not read in your analysis is another reason that much of the gasoline sold in the USA is 10% ethanol. Gasoline needs an octane booster so gasoline engines can have a more efficient higher compression. For many years this booster was tetra-ethyl-lead. And it was decided that it maybe was not healthy placing lead into our environment.
At Quora.com I read: “In the U.S., methyl tertiary butyl ether (MTBE) was initially used (starting in early 1970s) as an octane booster to replace tetraethyl lead in gasoline.
MTBE is water soluble, and leakage of fuel containing it, from underground storage tanks, caused substantial damage to groundwater. As a result, the use of MTBE in gasoline was largely phased out, or banned altogether, in the late 1990s / early 2000s.”
Because for ages ethanol has been drank by humans, in the USA 10% ethanol has become the accepted ‘safe’ octane booster.
The second product of the production of ethanol is distillers grains. Which is a protein rich animal feed. However, for a large plant like that of ADM, it must be dried to be economically shipped to the feeders of the livestock which can utilize this feed. Which, drying, much consume some type of fuel. But wet distillers grains from small localized ethanol plants can be economical used by feeders near these small plants.
Coal fired electrical plants produce a lot of ‘waste’ heat which could be utilized to dry the distillers grains being produced adjacent to these plants.
One thing that Galileo taught in ‘Two New Sciences’ was that bigger is not stronger or better. And there are known example of chemical plants which began as laboratory bench reaction, then pilot plant sized reactions, and finally a large commercial, more economical, plants where the reactions did not work on the big scale.
All this information, which you did not consider, needs to be considered in your analysis.
Finally, you need to recognize that the few farmers (now) of the USA are the most efficient producers of food grains for human foods (including meat) at the lowest cost in the world.
Have a good day, Jerry
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Herb Rose
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H Jerry,
Both the MTBE (which does not burn) and the use of ethanol were political nonsense concocted by politicians so they could profit at the expense of the people. (Sound familiar?) Using ethanol does not reduced emissions as claimed (the partial oxidation of ethanol reduces its energy and decreases mileage (just ask someone using 85% ethanol).. Ethanol is hydroscopic and polar which meant it absorbed water and corroded gaskets and seals in the engines ruining all the small motors that used it
As to its octane boosting properties aromatic solvents do the same thing without the damage. In modern cars the octave requirements have been reduced eliminating the need for ethanol. It is possible to construct a still that produces butanol which eliminates some of the problems of ethanol but does the same thing. The use of ethanol to save the planet with reduced emission (false) and renewable energy (Turning food into fuel is folly when there are so many other plant products that can be converted to ethanol). The profiteering by politicians by convincing the gullible public that they are fixing a non existent problem has brought us global warming and climate change
Have a good day,
Herb
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jerry krause
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Hi Herb,
As somewhat usual you did not reference any of your statements of ‘fact’. Of course, you can claim that I did not either.
But you do need to give a comparison of the cost per gallon of gasoline whose octane needs to boosted by something between ethanol and aromatic solvents. For I certainly have no idea what this comparison would be at today’s costs. And, of course, we know that the a good portion of the cost of gasoline in the USA is fuel taxes. And I wonder what the use of aromatic solvents as an universal octane booster could have upon the cost of synthetic fibers and ‘plastic’ matter. Again, I have no idea but I know it is something which should be considered.
You wrote: “Ethanol is hydroscopic and polar which meant it absorbed water and corroded gaskets and seals in the engines ruining all the small motors that used it.”
While I have heard and read these claims many times, I have run cars many miles using 10% ethanol and small engines without any evidences of what you stated. Now I will be dubious and question if some who promote these ideas do so because it increases their profit margins to sell these ‘premium’ fuels.
But as to “Ethanol is hydroscopic and polar which meant it absorbed water” it seems you have not experienced what happens when you have liquid water, which is not soluble in gasoline, in your fuel tank. You add some additive to make the liquid water soluble in gasoline.
As I remember, engineers at the University of Nebraska had state government vehicles use 10% ethanol gasoline as much as possible to test if there were the problems to which you refer. And as I remember, they found none. Of course, you can claim these engineers (and I) were dupes of the political nonsense concocted by politicians so they could profit at the expense of the people. (Sound familiar?)
Is no one going to profit from the alternative systems you propose? And have you tested it as the engineers of the U of Nebraska did?
It seems it is much easier for some to see the glass half empty instead of half full.
Have a good day, Jerry
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Chris Edwards
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Jerry why do you resort to outright lies to support others lies? Ethanol is known to be destructive for regular fuel systems, it actually destroys some plastic fuel tanks and IF your lie was true they wouldnt need to charge more for teh flex fuel vehicles taht are adapted to tollerate this sub standard fuel. I have repaired many small engines that have been rendered inoperative by ethanol, for a start if you dont stabilise it it becomes jelly in a matter of months when in contact with some aluminium alloys, go buy a Still small motor tool, they will give you a printout to read saying running with ethanol in the fuel invalidates the warranty. We all want a cleaner world, ethanol, like wind , solar and EVs are not any sort of sane answer.
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jerry krause
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Hi Chris,
You are right. It might seem I lied. I was referring to 2019 times and you are referring the times when it clearly observed that “leakage of fuel containing it, from underground storage tanks, caused substantial damage to groundwater. As a result, the use of MTBE in gasoline was largely phased out, or banned altogether, in the late 1990s / early 2000s.”
Not my words. Is it your claim that MTBE, or even tetra-ethyl-lead, should have never been banned?
My statement was in reference to what I considered to be a general fact that technology has solved the problems of ethanol to which you ‘witnessed’ in the early days of the ethanol usage. But I should have more clearly stated this.
Have a good day, Jerry
Carbon Bigfoot
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Herb wasn’t this ethanol scam pushed by the Bush Clan? And of course Grassley from Iowa got his fingers in the process to help his farmers with a new market. If you recall this boondoggle was instituted before the shale revolution in response to $150/gallon oil. Once these trough feeder programs start, it needs a wooden stake to end these bloodsucking vampires.
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Herb Rose
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Hi Carbon Bigfoot,
Yes both the ethanol and MTBE were pushed by the Bushes.
Herb
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Chris Edwards
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Hello Herb, thank you for injecting some truth in this bullshit fest! Ethonal is a poor fuel, it has a lot lower calorific value thus lowers fuel consumption, as you said it was a political answer to a foolish question. The article is sprincled with outright lies! As with all green ideas the only green went in to left wing politicians pockets! As for the idiot Kruse, as ethanol lowers engine power aoutput and aromatic biisters dont he needs to go back to school!
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Chris Marcil
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Cars ran just fine without Ethanol. Ethanol is added in order to jack the price up. Growing all of the added corn requires a lot more manure which has caused an increase in contaminated water in those areas. Normal crop rotation requires that a lot more beans need to be grown in order to enrich the soil enough, but the amount needed is beyond the consumption amount. And to do so will double the land needed.
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K Kaiser
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Hi Jerry,
Re: your comment at (August 9, 2019 at 2:22 pm): quote “Because for ages ethanol has been drank by humans, in the USA 10% ethanol has become the accepted ‘safe’ octane booster.”
That may be so, but the octane-boost from ethanol is much less than from additions of tetraethyllead or MTBE, or other compounds to gasoline.
If you look at the “Blending” numbers of various gasoline additives (ethanol, toluene, xylene, etc.), you’ll see that. For example, for MTBE (octane-#: 115), p-xylene (octane-# 100, but Blending-#: 145), you can see that the switch to “low-grade” (low -octane gas) in the 70’s or 80’s was a retro-grade step.
Internal combustion engines with higher compression (that need “high-grade” [high
octane-number] gasoline) were no longer built for the “average” car then.
Cheers,
Klaus
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jerry krause
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Hi K. Kaiser,
The key word in the last statement is “average”.
And you have not clearly defined ‘Blending-#: 145’. This because you stated ‘p-xylene (octane-# 100’ which as an aromatic octane booster.
Even in the time tetra-ethyl- lead there was always regular gasoline and ‘premium’ gasoline. Which I consider (maybe wrongly) the difference was the amount of additive added to the ‘straight’ refined gasoline. I have read, or been told, the 10% ethanol qualifies (octane number) as being defined as a ‘premium’ gasoline. And the service stations are happy to sell the premium at the higher price. I admit I do not know the actual facts of this. For in my word there are observable facts.
Have a good day, Jerry
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Chris Edwards
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Jerry, you seem seperated from reality, ALL gas since WW2 had some TEL in it, more in the better grades, even more in 130 octane avgas and race fuel, your ramble makes no sense, you reply to intelligent comments with schoolyard nonsense.
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EnergynEntropy
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When a barrel of crude oil doesn’t hold enough energy to lift itself up from deep in the underground – unassisted, riding on a flying carpet into the refinery and then into the fuel tank of your car, the barrel cannot lift up another barrel of oil to make that magical journey, too.
Yet, our economics, science, academia, industry, politics and the media educate people relentlessly, deceptively and hypnotically that the single barrel can, in fact, lift up not just one but 2, 14 and 20 other barrels – only not itself, though!
The claim is that, yes, a one barrel might not be enough for achieving that, but a million barrel will be more than enough to extract, collect and utilise another 200, 20, 14 or at least another 2 million barrels!
It is this ambiguity systemically injected into the consciousness of humanity since the early steam engine in the 18th Century what has led the world to go extreme today and think autonomous vehicles, solar, wind, nuclear, fusion, hydro, EVs, shale oil, shale gas, Corn Ethanol, Li batteries and others – are green[ish] and save any energy – where they are, actually, no more than gold-grade fossil fuels-derivatives.
Classic EROEI metrics were and are deceptive all along.
“No energy store holds enough energy to extract, collect and utilise an amount of energy equal to the total energy it stores”.
“No energy system can produce sum useful energy in excess of the total energy put into constructing it.
This universal truth applies to all energy systems [- the sun, fusion, nuclear, solar, wind, hydro, geothermal, autonomous vehicles, EVs, spaceships, and you name it].
Energy, like time, only flows from past to future”.
https://the-fifth-law.com/pages/press-release?principia=OFFbyPhysics
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Herb Rose
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Hi Energyentrophy,
It takes one barrel of oil to pump, transport, and refine 100 barrels of oil. It takes 1 barrel of fuel to produce 1.6 barrels of ethanol. It takes 20 barrels of fuel to produce 1 barrels of hydrogen fuel (Another utterly stupid idea supported by the idiots in government)
If every source of energy took more energy to produce than it produces we would have no energy to do anything.
Herb
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jerry krause
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Hi Herb,
You wrote: “If every source of energy took more energy to produce than it produces we would have no energy to do anything.”
A very accurate observation. So, Why haven’t we run out of energy? Read my comment to Energyentrophy. for I cannot emphasize what I wrote enough. This because it is so fundamentally critical to understand the world (not word as I wrote to Energyentrophy) in which we live.
Have a good day, Jerry
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chris Edwards
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EnergyEntropy did you real that steaming pile of garbage before you posted it?? Its nothing but inaccurate political drivel,
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jerry krause
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Hi EnergynEntropy,
“No energy system can produce sum useful energy in excess of the total energy put into constructing it. This universal truth applies to all energy systems [- the sun, fusion, nuclear, solar, wind, hydro, geothermal, autonomous vehicles, EVs, spaceships, and you name it]. Energy, like time, only flows from past to future”.
It is true we humans can not create ‘energy’. But energy is a part of our natural world. The ultimate source of this natural energy is the nuclear fusion reaction of hydrogen atoms in our sun and the nuclear fission of certain ‘radioactive’ atoms (elements) in the earth’s interior.
And I am sure you are aware that the fossil fuels which we use to produce energy to power our world are the result of the natural process termed photosynthesis of ‘living’ plants. And this thing we term life makes the earth the only observed location in the universe where we have observed that ‘life’ actually exists.
And in chemistry we commonly teach our students that the ordering of matter produced by photosynthesis does not violate the 2nd Law of Entropy because that disorder is occurring in the Sun, without which there would be no photosynthesis. Had to add this because ‘EnergynEntropy’.
Have a good day, Jerry
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