BioFuels Journal

by Myke Feinman, BioFuels Journal Editor

Danvers, MA --- A six-month study will determine how the ethanol industry is impacted by economic forces such as global agricultural production, the price of crude oil, and biodiesel production.

Ethanol 2012 Study was launched June 4 by The Hale Group, Ltd. and includes experts in agricultural, petroleum, public policy and technology sectors with a tight focus on the U.S. ethanol market.

Working with The Hale Group on the study are Cambridge Energy Research Associates (CERA), led by Dr. Daniel Yergin; former U.S. Secretary of Agriculture, Dr. Clayton Yeutter; and Dr. Bruce Dale of Michigan State University.

Results of the study will be released to the study’s subscribers in late November and early December 2007, with a media version released in December, according to Robert Ludwig, principal at The Hale Group.

Each subscriber will pay $50,000 for the study, which if done for a single client, could cost 10 times that much, Ludwig said.

“The rapid growth of ethanol production is likely to be one of the most significant events to impact the overall U.S. agricultural economy since mechanization,” Ludwig said. “Furthermore, the issues facing the ethanol industry require widely diverse areas of expertise.”

Ludwig said that this study will help the industry determine that if it can’t sustain the current level of profitability with rising corn prices and lower gasoline prices, what the industry can do to prepare itself.

“On the ag side, the overarching question is what capacity and how much can we produce?” Ludwig asked. “At what price levels will corn have to rise to pull out land from other uses into production for ethanol? What are the ripple effects for other crops such as soybeans?”

He added that ethanol is adding a “whole new layer of demand on agriculture which historically has not been there.”

Yeutter said that issues such as the tariff on foreign ethanol and the 51-cent-per-gallon tax credit will be explored.

“On the biodiesel side, there are comparable benefits and protections,” Yeutter said. “And the whole questions of cellulosic research will have an effect.”

Dr. Dale will be researching the cellulosic ethanol issues, examining different technologies available for production of ethanol from cellulose and potential coproducts such as lignin with a 15 % to 20 % protein content that could be used as feed for livestock in a similar manner to dried distillers grains with solubles (DDGS) currently.

Aaron Brady of CERA said the price of crude oil has been impacted since 2004, when the demand increased more than it has in 25 years. This had an effect of dwindling spare oil capacity.

“The world’s spare oil capacity fell to less than 2 million barrels per day,” Brady said. “Formerly it was 4 to 5 million. Without a sufficient supply cushion, this can be difficult to manage at best and prices tend to rise as a result.”

Brady said other factors affecting the price of oil are geopolitical events such as the war in Iraq.

“The path of crude oil and gasoline prices are critical for the ethanol market,” Brady said. “If ethanol can be priced competitively, then increased blending is going to occur.”

The Hale Group, Ltd., based in Danvers, MA, is a strategic management consulting firm specializing in the food system.

For more information, call 978-777-9077 or 1-800-229-4253.

See Related Websites/Articles:

• Ethanol 2012 Study
• The Hale Group

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