How Long can Corn Demand for Ethanol Hold Up?

Corn is mainly demanded for the production of ethanol. It is very cheap input for ethanol manufacturing and it is the reason that ethanol can stand strong in the fuel and energy market in comparison of unleaded gasoline and crude oil. Actually, just because of favorable demand of DDGs and ethanol low input cost the ethanol manufacturing units are achieving significant margin on their cost. But as the price of gasoline is getting down consistently it is the question of the time that is ethanol capable enough to stand in the price competition and how long the corn demand for ethanol hold up?

Corn field
Image: flickr.com/photos/16502322@N03

For the last three years, the production of corn in increasing in a very consisting way and there are enough stocks in reserve. And because of it, the ethanol producers are enjoying fair profit margin. And while the demand of ethanol is going upwards so it can be predicted that for next 3 to 4 years there will be no treating competition to the ethanol manufacturing units. On the other hand, the price reduction of crude oil is also helpful to ethanol profitability as the cost of energy input is decreasing because to it. But then it also results in the availability of low cost gasoline.

While we study the recent scenario, it is clear that the high profit margin of ethanol production is because of the purchase of corn at remarkable low prices. If in near future, due to the unfavorable production of corn, the input cost increases, it can raise a big challenge in front of the entire ethanol industry. The corn price hike will suffer the profitability and also the product demand of ethanol production units.

The experts of the industry are also pressurizing on search of alternative input products to cut the dependence on the production and supply of corn. Soybean also can be a good option as it also costs very low and is being produced at a very large scale. Soybean can also successfully replace the corn in the manufacturing of DDGs. It is loaded with the surplus of nutritional values and is very popular. It can be a mean to cut the costs and increasing the profit margins. As the modern technical advancements, some efforts are being taken in preparing the blend of ethanol and gasoline, so that the competition may be turned into the collaboration.

At the end of the study, it is sure that the profitability of the ethanol industry is strongly based on the lower cost and uninterrupted supply of corn. And when good production is predicted for upcoming months plus stockists have adequate reserve for near future demand, the industry can simply enjoy its margins. But it is highly recommended to search for and apply new option as input and also the new blend should be developed to reduce the dependence on corn.

 

Author’s Bio: Rossi white responsible for developing SEO content as well as website content for both internal and client projects. She comes with an Advertising and Journalism background, having experience of working as an Ad Copywriter, Feature Writer and Newspaper Columnist.

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