The year 2005 was marked by a flurry of construction activity in the Nation’s ethanol industry, as ground was broken on dozens of new plants throughout the U.S. Corn Belt and plans were drawn for even more facilities. As of February 2006, the annual capacity of the U.S. ethanol sector stood at 4.4 billion gallons, and plants under construction or expansion are likely to add another 2.1 billion gallons to this number (map). If this trend and the existing and anticipated policy incentives in support of ethanol continue, U.S. ethanol production could reach 7 billion gallons in 2010, 3.3 billion more than the amount produced in 2005.
The tremendous expansion of the ethanol sector raises a key question: Where will ethanol producers get the corn needed to increase their output? With a corn-to-ethanol conversion rate of 2.7 gallons per bushel (a rate that many state-of-the-art facilities are already surpassing), the U.S. ethanol sector will need 2.6 billion bushels per year by 2010—1.2 billion bushels more than it consumed in 2005. That’s a lot of corn, and how the market adapts to this increased demand is likely to be one of the major developments of the early 21st century in U.S. agriculture. The most recent USDA Baseline Projections suggest that much of the additional corn needed for ethanol production will be diverted from exports. However, if the United States successfully develops cellulosic biomass (wood fibers and crop residue) as an economical alternative feedstock for ethanol production, corn would become one of many crops and plant-based materials used to produce ethanol.
There is another problem with relying on a food-based biofuel, such as corn ethanol, as the poor of Mexico can attest. In recent months, soaring corn prices, sparked by demand from ethanol plants, have doubled the price of tortillas, a staple food. Tens of thousands of Mexico City's poor recently protested this "ethanol tax" in the streets.
In the United States, the protests have also begun -- in Congress. Representatives of the dairy, poultry and livestock industries, which rely on corn as a principal animal feed, are seeking an end to subsidies for corn ethanol in the hope of stabilizing corn prices. (It takes about three pounds of corn to produce a pound of chicken, and seven or eight pounds to grow a pound of beef.) Profit margins are being squeezed, and meat prices are rising.
U.S. soybeans, which are used to make biodiesel, may be about to follow corn's trajectory, escalating the food vs. fuel conflict. The National Biodiesel Board recently reported that 77 biodiesel production plants are under construction and that eight established plants are expanding capacity.