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More cars burning corn
October 21, 2016 - David Kruse
There are some cracks showing up in the ethanol blend wall as ethanol pushed past the E-10 barrier in overall U.S. gasoline consumption in late September to 10.2 percent. I have noted that ethanol use was still key for corn demand and that moving the needle from E-10 to E-11 as the parentage of ethanol use relative to gasoline consumption, would use another 500 million bushels of corn. Farmers need more demand to reduce the burdensome carryover now pressing corn prices below the cost of production. Farmers will get another draft of ARC payments this month — where we live the payment is estimated to be $77 per acre. Due to the formula, those payments are forecast to drop to $9 per acre next year. The subsidies that farmers get are going away and the price safety net is set so low most farm’s balance sheets hit the ground before that net can catch them. There is no appetite in Washington to increase price support, in fact, we will be lucky to get another farm bill as good as the last. Farmers need that 500 mln bushel more ethanol demand to lift the price of corn to breakeven. Yet many farmers only use the E-10 blend, no different than other consumers whose incomes do not depend on ethanol demand. Some farmers use every excuse in the book as to why they don’t use higher ethanol blends. Frankly I don’t have a problem with that as long as they don’t cash their ARC subsidy check. Why would you give a rancher who is a vegetarian a subsidy? Why would you give a cotton farmer who is wearing micro-fibers a subsidy? Why would the government pay corn producers subsidies who do not use their own product? Farmers should lead the way (including cooperatives) on ethanol demand consumption. They are not leading with any gusto, still taking the government handout without stepping up ethanol consumption. The way to get past the E-10 blend wall is with E-15, E-30 and E-85 blends. Even E-15 is 50 percent more ethanol than E-10. All vehicles can use it while the EPA approves it for vehicles newer than the 2001 model year. Thirty fuel retailers in Iowa have kicked off what they call a “Pink at the Pump” campaign donating 3 cents per gallon to breast cancer awareness. A breast cancer survivor said, “The truth is, gasoline is full of toxic aromatics. Ethanol has no toxins or carcinogens, so the higher the ethanol blend, the less toxic aromatics you are being exposed to when fueling your car. This makes E15 not only a healthier choice, but the higher octane choice that reduces greenhouse gas emissions and saves you money at the pump.” Remember that E-10 replaced the additive MTBE which was a poison. The best fuel blend for vehicles, mileage efficiency, price savings and ethanol consumption is E-30. The truth is that all vehicles can use it. Brazil burns E-27.5 in all vehicles in that country because it is the most efficient ethanol blend and there was no petroleum industry pushback in Brazil to biofuel. The Glacier Lakes Ethanol Co., in Watertown, South Dakota, has stepped up with some real world research on use of E-30 gaining information that they are sharing with EPA and auto manufacturers. It is a year-long project tracking 50 vehicles of different models started in October 2015 called the “E-30 Challenge.” The E-30 challenge goals were to: ? Increase general public levels of awareness. ? Gather auto engine performance data. ? Dispel myths about Premium E-30. ? Change consumer preference and behavior. ? Create “prototypes” for industry use. E-30 was being sold at seven locations in Watertown resulting in a 600 percent increase in E-30 sales. They talked with the local mechanics that were behind it. My mechanic told me that my non-flex fuel vehicle can handle 50 percent ethanol so E-30 is 40 percent less than that. There were two primary results. There were zero check engine lights. Vehicles perform very well on E-30. I can attest to that by having used E-30 in my own non-flex fuel vehicles for as long as it has been available here with excellent performance. The second important result of the test was that vehicle mileage using E-30 showed a .03 mileage reduction from E-10 (negligible). This was just more proof of what we already knew from experience in Brazil and from other users which was that the E-30 mid-blend fuel is the ideal fuel available on the market today. They documented data showing more torque and more power from E-30. The fuel is cleaner. There is essentially no mileage difference with E-10 and it sells 20 to 30 cents per gallon cheaper than E-10. I have great E-30 availability where we live, but in other regions the fuel is less available, in part because retailers like Cenex have not stepped up to provide access for consumers to higher ethanol blends such as E-30. That needs to change. The bottom line is that farmers can find E-15, E-30 or E-85 if they want to and the need to boost ethanol consumption to help corn demand should make them want to. They need to set the example proving that these higher blends are in consumers’ best interests to use. This is something that they can control themselves to boost demand for the corn they produce that will benefit their incomes — when frankly, they are other-wise losing money.
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.
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