Ethanol Plant Investments Shifting Geography

Cindy Zimmerman

NE EthanolInvestments in ethanol plants are growing across the nation to areas with larger populations, according to a new report, “U.S. Ethanol,” by Rabobank.

Grainnet reports
by the first quarter of 2009, more than 200 ethanol plants are expected to be in production, which represents a capacity increase of more than 91 percent during a three-year time frame.

Much of this growth in ethanol production is largely driven by demand created by government support.

In fact, “government support for ethanol production, and increasing demand for ethanol in all states, will continue to foster growth of destination plants,” said Jennifer Cole, Food & Agribusiness Research Associate.

The first ethanol plants – in the Corn Belt – are often referred to as origination plants, whereas plants outside the Corn Belt are often referred to as destination plants.

Investors are finding that the traditional areas for ethanol plants, in the Corn Belt, are becoming saturated, and are looking elsewhere.

“One of the main advantages to building plants outside of the Corn Belt is the ability to ship ethanol shorter distances,” said Cole.

“It is more practical and less costly to transport corn compared to ethanol.”

By moving the final product closer to consumers, investors are able to keep costs in check.

Because ethanol is a highly flammable substance it incurs higher insurance rates than shipping raw corn.

So the focus of investments in ethanol plants has shifted from corn producing states – Iowa, Illinois, Nebraska and Minnesota – to areas such as New York, Texas, Oregon, Arizona and Washington.

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