June 3, 2009

An increase in the amount of ethanol that can go into a gallon of gasoline would be a boon for the industry and corn farmers, a study by the University of Missouri's Food and Agriculture Policy Research Institute said.

Boosting the ethanol limit in gasoline from 10 percent now to 15 percent would increase US production of ethanol by 660 million gallons a year by 2013, the institute said. It said the rise wouldn't be immediate because "it takes time for new capacity stimulated by higher profitability to come on line."

Raising the limit in gasoline would give "consumers greater access to ethanol" without having to get more "E85" specialized automobiles on the market. The current 10 percent cap is for traditional gasoline used by most consumers, while a small percentage of vehicles are designed specifically to run on an 85 percent ethanol fuel mix.

Tom Buis, chief executive of the ethanol-producer group Growth Energy, said he is pleased the study, which also showed that a boost in the ethanol blend rate in gasoline would increase net farm income by US$460 million a year.

Growth Energy is one of the groups petitioning the Environmental Protection Agency to allow for an increase in the blend rate. US Department of Agriculture Secretary Tom Vilsack has said he supports an increase.

"We're encouraged by the action taken recently asking for comments on raising the rate to anywhere from 11 percent to 15 percent and we're hopeful that within a relatively short period of time ... that we see some positive steps from the EPA in respect to that blend rate," Vilsack said recently.

While allowing more ethanol in gasoline boosts revenue for fuel producers and corn farmers, it also raises feed prices for livestock producers by US$310 million per year, according to the study.

"Greater corn demand for ethanol causes higher crop prices, rising crop receipts, and greater livestock feed costs," the report concluded. "The overall effect is an increase in net farm income."

Food costs would also be pushed upward, but not by much, according to the report.

"The increase in consumer food expenditures is proportionately small," it said.