This article originally appeared as part of “Local Leadership” Joe Machens Dealerships director of marketing Michele Cropp created mag·ma (McLarty Automotive Group Marketing Agency)...
Under a state law that went into effect on Jan. 1, all gasoline sold in Missouri must contain at least 10 percent ethanol. Even before the requirement, Missouri’s ethanol industry was expanding dramatically, drawing praise for its economic impact and its role in reducing U.S. dependence on foreign oil and drawing the ire of critics who say the growing use contributes to rising food and commodity prices and is an inef- ficient energy source. In the last three years, the state’s ethanol industry has grown from 30 million gallons to more than 200 million gallons. Five farmer-owned plants operate in Missouri, three of them within 60 miles of Columbia, and four more plants are planned or under construction. MFA Oil President Jerry Taylor spoke to CBT about the ethanol industry’s positive impact on the local, state and national economy and rebutted criticisms of ethanol use. Although not a producer of ethanol, Columbia-based MFA is one of the largest distributors of the product and owns the Break Time convenience stores. Taylor was accompanied by Gary Marshall, CEO of the Missouri Corn Growers Association.
CBT: Why is ethanol production important to our regional economy and how is MFA affected by increased use of
Taylor: Perhaps what most people have questions about is the standard that went into effect on the first (of January). Is it good for Missouri, or is it not? The first piece of that answer is ethanol has been cheaper than gasoline for a few years. Today it’s 6 cents cheaper. Last week it was 8 cents cheaper. So if you blend 10 percent ethanol with 90 gasoline, you’ve got a product that is about 6 to 8 cents cheaper. That is all being passed on to Missouri consumers The other piece of the equation in my mind: There are no farm payments being made in Missouri for corn. A lot of people wonder about the economics of it. With the price of corn being up, which may or may not have anything to do with ethanol, quite frankly, there are no farm payments being made.
When you buy either E85 or E10 in Missouri, that money [stays here]. Our trucks run a circle in Missouri. We pick up the ethanol in local plants, grown by local farmers, and the money stays locally. It comes and is spent in Kansas City, St. Louis, Columbia. So there’s a multiplier effect. When you talk about buying foreign oil, that’s a line-item expense. That money leaves this country.
What happens when it’s spent locally—we think the multiplier effect is rather astonishing. In this ethanol debate of whether it’s right or wrong, to me, just national security and the economics of it are critical.
We have promoted ethanol for a long time. We’re a farmer-owned cooperative.
There was good reason for us because we saw it as an economic development
piece for rural Missouri. For those people that drove rural Missouri in the ‘80s, like I did, and go drive it today, you can see that it has been very good for Missouri to keep this money locally. Regarding federal subsidies, in the last four years, oil has gotten $150 billion.
Oil is so substantially higher subsidized than ethanol. For people to say that ethanol is a hog at the trough for subsidies, [anyone who says that] simply hasn’t looked at the numbers.
CBT: Should we be growing corn for food and not for energy?
Taylor: If you analyze the effects of corn on the food prices, you cannot simply draw the conclusion that there’s a profound effect between the price of corn—let alone the price of ethanol—driving the price of corn. We know it’s an additional demand; 20 percent of the corn is going to ethanol. Has that doubled or tripled the price? All other commodities have done the same thing. One would have to believe that there’s something else going on, like the eating habits around the world changing and the growth in China and India, speculation in the commodity markets—a lot of those types of things. Food to fuel—I can draw no links.
Let’s talk about the environmental effects.
Nobody disagrees that what comes out of the tailpipe is cleaner. But we’re in the debate over rainforests in Brazil, and trying to draw the line between ethanol and the rainforest.
Our industry is providing right now almost 7 percent of our fuel in this country. In any commodity market, to have 7 percent of the supply taken away is a profound thing.
CBT: What about the argument that it takes almost as much energy to produce the corn as the energy ethanol provides?
Taylor: Of all the 17 studies that were done, 13 are positive; 4 are negative. If you go look at the studies, there is no question in my mind that it is a positive BTU conversion. When we started out originally in this industry—oil was in the ethanol business back in the early ‘70s—we were lucky to get two gallons of ethanol for every bushel of corn. Today that’s pushing three gallons of ethanol for every bushel of corn. The conversion ratios are continuing to improve. There are advances being made every day.
We have to have bettermileage vehicles. Seventy- five percent of the BTUs burned in this country are for transportation, so transportation is the crux of the problem. I think what you’ll continue to see is what we’ve already started in Missouri, and that is that you have a locally grown industry because part of the negative footprint in this day and age is transporting fuels from one place to another. What happens in Missouri right now is this corn is all grown and trucked locally.
What you’ll see in the second phase, I believe, even though there’s no commercially viable cellulosic ethanol plant today, there are several … in the experimental phase. Those types of conversion ratios are huge because they’re using an enzyme to convert starches to sugars in a process that is substantially more productive. That will be most likely what we’ll call “generation 2.” I think that’s coming more quickly at us. When I say quickly, I’m saying the next five years. MFA Oil, we would hope to be involved in that cellulose business.
CBT: When you say cellulosic, could you explain what are you talking about?
Taylor: Literally anything from living cell. It could be trees, waste, grass. You need something that grows prolifically—because [the conversion process] takes a lot of it—and is tolerant to water, tolerant to soil. Switchgrass is the type of feedstock they’ve talked about.
There’s a great deal of work being done on genetics to actually produce the seed that enhances what you’re trying to achieve out of it.
On the oil side, there is significant improvement being made, and that’s the soybean. We know that there are substantial gains being made in oil producing seeds.