Ethanol Producers Respond to Market Conditions

Cindy Zimmerman

Corn oil recovery is helping the bottom line of ethanol producers with tight margins, according to a new report from the Energy Information Administration.

eiaBeginning in summer 2012, the prices of ethanol and corn reached levels where production costs at relatively simple ethanol plants exceeded revenue. These simple plants, which are not able to recover corn oil, make up a diminishing portion of the ethanol industry. Reacting to the market conditions, several ethanol plants temporarily shut down. By January 2013, the number of idled ethanol plants had grown to at least 20.

Relatively simple ethanol plants produce ethanol and distillers grains from corn. More advanced plants are able to recover other products, like corn oil, from a portion of the distillers grains. Ethanol plants with corn oil recovery units are able to earn more revenue, so they usually have higher profit margins than plants without corn oil recovery, even if their production costs are slightly higher.

According to the EIA report, corn oil recovery is one of several strategies that the ethanol industry is developing to improve margins. “Others involve switching to processes that are more advantageous under the renewable fuels standard (RFS). For instance, Aemetis in Keyes, California, is changing its feedstock from corn to sorghum and replacing its natural gas consumption with biomass. Other companies plan to produce butanol rather than ethanol, or integrate cellulosic feedstock, such as wood waste or corn stover (e.g., leaves, stalks, and leftover cobs after the corn harvest). These approaches allow their products to qualify as advanced biofuels under the RFS, a category that specifically excludes ethanol produced from cornstarch, which has been the dominant feedstock for the U.S. ethanol industry.”

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