WHILE ethanol production is no less controversial today -- still plagued by the phrase "food versus fuel" -- industry leaders contend that the aggregate benefits of producing renewable fuels in the U.S. include the creation of hundreds of thousands of jobs and billions of dollars in gross domestic product (GDP).
A recent study commissioned by the Renewable Fuels Assn. (RFA) showed that, for states with local ethanol plants in operation, the economic benefits are significant.
At the end of 2012, RFA said 211 ethanol plants in 28 states were producing ethanol at an annualized rate of 13.1 billion gal. -- well off the 14.7 billion gal. those plants are capable of producing. With high corn and oil prices pressuring plants' margins, production fell nearly 5% last year to an estimated 13.3 billion gal.
With the past year's economic challenges plus ongoing legal opposition from the petroleum and food marketing sectors, RFA said the report on the study, released earlier this month by analyst John Urbanchuk at Cardo ENTRIX, points out the important contributions the renewable fuel industry makes to the U.S. economy.
Urbanchuk found that ethanol production supported more than 383,000 direct and indirect jobs across all sectors of employment last year and contributed $43.3 billion to GDP.
"We are successfully creating job and economic opportunities in a tough economy," RFA president Bob Dinneen said. "Not only are we helping revitalize rural communities across this country, (but) we are positively impacting states outside of the Corn Belt."
According to the state-by-state analysis, the non-Corn Belt states receiving the most significant benefits were Texas, Colorado and Tennessee, each with less than 400 million gal. of ethanol production capacity but enjoying economic benefits from supporting more than 4,000 jobs.
Coming as no surprise, Corn Belt states with heavy concentrations of ethanol production capacity saw the most economic benefit from the industry. Iowa easily was the biggest beneficiary since its production of 3.8 billion gal. supported more than 63,500 jobs. Nebraska, Illinois, Indiana, Minnesota and South Dakota are all home to more than 1 billion gal. of production capacity, which supported more than 22,000 jobs in each state in 2012.
Nebraska and Indiana felt the greatest pains from drought-inflicted high corn prices last year and, as a result, idled 314 million and 322 million gal. of production, respectively. Minnesota and Kansas also had significant differences in their productive capacity and actual output last year, each sidelining more than 100 million gal. of capacity.
In calculating the ethanol industry's contribution to the U.S. economy in 2012, Urbanchuck analyzed employment, income and GDP supported by the industry by examining both forward and backward linkages to the various sectors of the economy touched by the renewable fuel business. The major component industry benefiting from ethanol production was agriculture, reflecting "the importance of ethanol demand to total corn utilization, the aggregate value of crop production and crop receipts and farm income."
Agricultural production accounted for $32.4 billion of the total economic benefits and 267,605 jobs quantified in the study. The report notes that ethanol production is a capital-intensive, rather than labor-intensive, industry, and as such, the direct number of jobs supported by the industry is relatively small and concentrated primarily in the manufacturing and agriculture sectors (Figure).
Looking at ethanol industry expenditures in 2012, the study found that producers spent nearly $40 billion on raw materials, inputs, goods and services to produce ethanol last year. Of that total, more than $33 billion was spent on corn and other feedstocks, with natural gas and electricity comprising more than $2.1 billion of total industry spending.