The U.S. Energy Information Administration (EIA) reported that ethanol production averaged 970,000 barrels per day (bpd) last week, the highest rate since the record production of 972,000 bpd back in June. With corn currently trading around the cost of production, at $3.64, increased ethanol production is helping corn farmers and the rural economy by providing a secondary market for corn.
Last week, the United States Department of Agriculture projected 2014 corn production would exceed 14.4 billion bushels, an all-time record for the second consecutive year. They also projected U.S. farm income would drop 14 percent to $113 billion this year, the lowest level in four years. With yields steadily increasing and the profitability of agriculture declining, increased ethanol production helps support corn prices, jobs and investments in rural communities.
With global food prices at four-year lows, America’s corn farmers have once again proven that they can produce a bounty of low cost food, feed and fuel. Without ethanol, the agricultural community would be in dire straits because corn prices would likely be priced below the cost of production. “Ethanol production helps support corn prices, jobs and communities,” said Bruce Babcock, professor of economics at Iowa State University. "When they turn plants on, they run pretty much at a constant level, whether margins are good or bad, so as long as ethanol plants are running, the jobs are there, the support and demand for corn is there, and the supply of distillers’ grains is there."
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