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Why corn has been a key contributor to biofuel production

Xun Yao Chen

Must-know drivers that are currently fueling crop demand (Part 2 of 4)

(Continued from Part 1)

Why use corn as a biofuel?

Use of corn as a crop to produce ethanol isn’t a random occurrence in the United States. One measure of assessing whether a crop is a viable source of ethanol production is energy production yield per acre. This measures the estimated amount of energy extracted from an acre of crop harvested.

Productivity is an important factor of crop input

As crops are critical commodities to the daily lives of citizens on Earth and land is scarce, it’s important for officials to promote, and for ethanol producers to use, crops that can generate the highest amount of ethanol. Otherwise, it can have a significant impact on the price of crops used to produce biofuel and disrupt the global food chain.

Sugarcane is king, but corn comes second

The chart above shows that sugarcane is the king of crops when it comes to ethanol production. Use of sugarcane as a source of ethanol input is common in Brazil—the country that is considered to have the world’s first sustainable biofuels economy and a leader in the industry. It all started when the government realized the possible threat of reliance on foreign oil in the 1970s, when oil prices were spiking due to supply problems. So Brazil started to search for alternative sources of fuel.

The name “sugarcane” may mislead people to think that sugarcane has a higher amount of sugar. In terms of the amount of sugar that can be extracted per metric tonne of plant or crop, sugarcane likely lags corn. The average yield for sugarcane is 60 to 70 metric tonnes per hectare, but corn yield in the United States is ~10 metric tonnes per hectare, according to the USDA.

Why the United States uses corn

Since the amount of extractable ethanol energy from an acre of sugarcane is only about twice the amount from corn, the sugar content in a metric tonne of corn is probably three times more than that in sugarcane based on weight measurement. Although the United States does produce sugarcane, particularly in the southern region, its production is limited to just 3% of what Brazil is producing.

While studies show that biofuel (biodiesel) produced from soybean produces more usable energy and is more environmentally friendly than corn-based ethanol, the scale required to produce ethanol in the United States can’t be met by soybean.

Will ethanol consumption drive corn production?

Gasoline consumption in the United States has leveled off as cars became more fuel-efficient, auto manufacturers started promoting hybrid cars, and the employment level hasn’t really recovered. In the event that gasoline consumption does pick up again, it could have a significant impact on corn demand, which would be positive for the Market Vectors Agribusiness ETF (MOO), CF Industries Holdigns Inc. (CF), Potash Corp. (POT), Mosaic Co. (MOS), and Agrium Inc. (AGU) as farmers use more fertilizers.

Continue to Part 3

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