Iowa State Economist on Ethanol and Corn

Blend wall causing downward pressure on corn and ethanol prices.

Published on: Aug 5, 2009

Iowa State University Energy Economist Robert Wisner predicts that within three years, demand for corn for ethanol may well exceed the traditional largest source of demand for corn – livestock feeding. Presently, ethanol consumes about one-third of the U.S. corn crop. Wisner says with the current large size of the ethanol industry, corn prices have become closely related to crude petroleum and gasoline prices because corn is now a major energy crop.

 

Writing in the AgMRC Renewable Energy Newsletter, Wisner says this ethanol success story has transformed Midwest agriculture from a sector that experienced excess production capacity, low prices, and government income supports to a growth sector with frequent periods of tight supplies even with good crop yields.

 

Wisner says the blend wall limits the market for ethanol, thus tending to depress its price relative to gasoline. He forecasts that unless the U.S. Environmental Protection Agency decides to authorize the higher E12 or E15 blends that ethanol boosters seek, ethanol prices may continue dropping relative to gasoline, slowing ethanol industry expansion and putting downward pressure on corn prices.