Planning for the Future Beyond Ethanol

As painful as it may be, it is wise to plan for the future in the event of significantly reduced demand for ethanol.  As more electric vehicles, more hybrid vehicles, and more energy efficient cars and trucks are driven throughout the United States, the demand for ethanol will significantly decline.   The ethanol industry is already declining.

Over half of Iowa’s corn crop is used in producing ethanol.  “Iowa leads the nation in ethanol production, with 57 percent (1.5 billion bushels) of the corn grown in Iowa going to create nearly 27 percent of all American ethanol.”[1]  If the demand significantly declines, then there will be a glut of corn, resulting in lower prices for the corn.  That can be devastating to farmers.  We want to ensure that Iowa farmers have a future that avoids bankruptcies, farm foreclosures, and ruptured lives.  The shifts happening in the ethanol industry and the side-effects on the farmers are difficult to think about.  But we do need to be prepared.  Throughout our history, businesses and industries have faded away over time – landline phones, mainframe computers, punch cards, photographic film, buggy whips, and so on.  Just like those industries morphed into new businesses or just faded away, the prospect of ethanol might not be rosy.  The ethanol industry has been disappointed by cellulosic ethanol sales that just didn’t pan out.  That is where thinking and planning about what is beyond ethanol comes in.

The ethanol industry has great hopes that it can keep demand for its products high:

• The industry has great hopes for increasing the demand for higher blends of ethanol used in trucks and cars. 
• The industry also has great hopes that the western states, particularly California, Oregon, and Washington, will mandate greater blends of ethanol in their transportation fuels.  The industry has great hope that California will declare ethanol to be a low-carbon fuel, especially if the ethanol plants sequester the carbon that is emitted during the manufacturing processes.
• The industry is also hoping that ethanol can be successfully adopted in aviation fuels.

But what if the hopes of the ethanol industry are dashed?  It won’t be just the ethanol industry that declines; it will be the farmers producing the corn for the ethanol industry.  Nobody wants to see the farmers suffer.  So what should we, as a state, be doing to provide contingencies in the event that demand for ethanol continues its decline?  Here are some policies that need to be pursued:

• The Iowa Department of Agriculture and Land Stewardship should establish a department that studies what directions farmers should move should ethanol continue its decline. 
  • The department should develop of plan for dealing with significant declines in ethanol demand. 
  • The department should develop policies and incentives related to idling less productive land and putting it into CRP.
  • The department should create demonstration projects that can be used to train farmers on good practices.
• Iowa Department of Agriculture and Land Stewardship should establish financing to assist farmers in making the transition and implementing the changes.
• The Department of Agriculture should consider increasing incentives for on-farm practices to reduce nutrients leaving the farm fields, including edge-of-field practices, grass waterways, and stream buffers.
• Farmers should be encouraged to include additional crops in their rotations.  There may be new opportunities for Iowa farmers, including growing more fruits and vegetables.  Water shortages in western states may result in shifting fruit and vegetable production to the Midwestern states, providing a perfect opportunity for Iowa farmers.
• The Department of Agriculture, along with Iowa Economic Development, should develop new industries to make products from Iowa farm products, including hemp.

It is painful.  But with an industry that involves so many people across the state, it behooves us to strategically think about a future without ethanol.