The Evolution of the U.S. Corn Ethanol Industry
In a recent article in the Regional Economic Development publication of the Federal Reserve of St. Louis, the three primary phases of the U. S. Corn Ethanol industry were documented.
These primary phases are:
- Birth – the events surrounding the oil shocks of the 1970’s from the OPEC price increases
- Development – The decline in fuel prices in 1980’s and 1990’s allowed the ethanol industry to get more efficient
- Mature – During the early 2000’s, the industry became more mature due to certain economic changes and political initiatives
This is a fairly long article with a lot of economic jargon, but it does a good job of describing where the ethanol industry has been and where it might be going. It also does a good job of reducing the rhetoric regarding the large increases in corn prices being only a function of the ethanol industry.
One interesting chart is on page 14 of the publication. This chart shows the pricing of corn in North Central Iowa from 1970 to 2008. I would hazard a guess that the general public believes that last year’s corn prices were an all time high by a wide margin. However, in the chart, using constant inflation adjusted numbers, the corn prices during the mid 1970’s were in fact close to $11 per bushel compared to the approximate peak of $7 in 2008.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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