Mark Shwartz of Stanford News released a story yesterday titled “Stanford scientists discover a novel way to make ethanol without corn or other plants”. In a nutshell Stanford University scientist Stanford scientists have created a copper-based catalyst that produces large quantities of ethanol from carbon monoxide gas at room temperature. In other words they believe they have developed a new way to make liquid ethanol efficiently without using corn or other crops. Even more concerning for US corn producers is the fact the NEW technique is said to be more environmentally friendly and efficient than the current method. One of the main reasons labs around the world have been trying to find an alternative is because they want to stop using agricultural land and more importantly want to stop using so much “water” to produce the fuel. Studies floating around the trade (from those who oppose ethanol) argue that it takes more than 800 gallons of water to grow a bushel of corn, which, in turn, yields only about 3 gallons of ethanol. Keep in mind the US leads the world in ethanol production, with 13.3 billion gallons produced in 2013 and between 13.5 and 15.5 billion gallons projected to be produced this year. Before you hit the panic button, chemist Matthew Kanan says the new method is still 2-3 years away from a real working prototype. Then you have to decide from there what kinks need to be worked out and whether the process is even viable for mass production and commercial use. Bottom-line, we could be 5-years or more away from this being a viable substitute. Even though it’s nothing we need to worry about today or next week, it’s certainly something we need to be thinking about as we move forward. Remember, we currently use about 5.0 billion bushels of US corn for ethanol. This is about 35% of our total production. Take this demand out of the equation and we are all of a sudden swimming in corn supply.
Now that ethanol has officially become more expensive than gas there is some question about ongoing demand. With major logistical issues across the country, ethanol delivered into the New York Harbor is said to be close to $4.00 per gallon (up over 60% this year) vs. the final fuel product of gasoline blended with about 10% ethanol, which is going for just under $2.90 per gallon. With ethanol being so much more expensive the bears will argue it makes sense to simply not use it. However, those in side the industry say the refiners need to use the ethanol to reduce emissions and boost octane levels. Bottom-line, even though it looks a bit scary for ethanol at these price levels I doubt you will see a major setback in demand.