Ethanol Boosts Economies of US Midwest Farm Towns
Date: 04-Aug-06
Country: US
Author: Chris Baltimore
High gasoline prices have fed a voracious demand for corn, which will mean the highest average US price in 10 years. Federal tax subsidies enacted last year also have helped Illinois farmers get more cash for their corn by selling it to ethanol plants.
These plants, in turn, make a tidy profit and provide jobs, pumping more money into the local economy.
"This is just a huge thing to the farm community," said Dennis Denton, a farmer in Princeton, Illinois, who has about 3,500 acres under development.
Denton was among about two dozen farmers and industry representatives who gathered at the Channahon Village Hall to sing the praises of ethanol.
"We want to replace imported oil with home-grown fuels like ethanol," said Illinois Republican Rep. Jerry Weller, who introduced the keynote speaker, US Energy Secretary Sam Bodman.
"You're all going to do well making ethanol," Bodman said.
Ethanol is an easy message for US lawmakers to sell with gasoline prices at US$3 a gallon.
"Do you like buying foreign oil?" asked a sign posted on a telephone pole in Kendall County, Illinois.
"We raise gas on US soil," the next sign pronounced.
Bodman thanked the group for promoting ethanol, but cautioned that federal subsidies for corn-derived ethanol, slated to expire in 2010, will not last forever.
"We've got to get out of the subsidy business and let markets operate," he said. "The question is when."
Weller was not pleased with Bodman's choice of words. "I don't use the term subsidy," Weller said. "I use the term incentive."
The Energy Department on Wednesday unveiled a plan to spend US$250 million over five years to fund private research into finding new ways to make fuels from other renewable sources such as soybeans, wood chips and agricultural cast-offs.
New sources are needed because gasoline supplied from corn-blended ethanol is unlikely to exceed 14 billion gallons a year -- about 10 percent of the entire US fuel supply, Bodman said.
But for now, corn is the word. In Weller's congressional district alone, ethanol companies plan to build four plants. The district's one existing biodiesel plant has doubled its production over the last year.
It's a trend that is playing out across the United States. Ethanol costs about US$1 a gallon to produce, but ethanol makers get a 51 cent incentive from federal tax subsidies. Ethanol producers can sell their product for around US$2.50 a gallon.
Analysts at Fimat Energy have forecast that US ethanol supplies will rise by more than 90 percent by the end of 2008, setting the stage for a potential ethanol glut in the Midwest.
Denton said he is not worried, and has shifted his crop away from soybeans to take advantage of soaring corn prices.
"It's much more profitable than growing (soy) beans right now," Denton said.