Ken Parrent – Ethanol Impact 2014

ken parrentThe Indiana Corn Marketing Council has released their economic impact study of the ethanol industry  in 2014 and shared their findings at their annual Ethanol Forum yesterday in Indianapolis. Director of Biofuels, Ken Parrent, says the industry continues to thrive.

“The ethanol industry contributed just under one billion dollars in value to the Indiana economy. They directly employ more than 500 people at the 14 ethanol plants; but for each job created directly at the plant, it creates about seven jobs elsewhere in the economy. So, in total, more than four-thousand jobs created by the ethanol industry, directly or indirectly, here in the state.”

Parrent says it’s not just agriculture that benefits from biofuels; the business spills over into a lot of areas.

“The utilities, the electric power and natural gas that’s required, the real estate, it contributes to state and local taxes; but most of it comes in the improvement in prices to Indiana corn farmers. That in itself contributed more than 100 million dollars to the state economy.”

How does this year’s report stack up against previous years?

“We went from about 900 million gallons produced in 2013 to slightly more than a billion produced in 2014. So the industry is growing.”

Parrent says the data in the report doesn’t even consider latecomers in 2014.

“We had one plant that had previously been idled start up mid-year in 2014. So that plant should have a whole year of production behind them. That would be the Valero plant in Mount Vernon. We had another plant that restarted late in the year, the Noble Americus Plant in South Bend. They actually didn’t have much production in 2014 but we expect to see them come online and maybe adding another 50 or 60 million gallons in 2015.”

Indiana ranks fourth in ethanol capacity; Parrent says look for production to be larger in 2015.

“Because we’ve had several plants that aren’t operating, production actually ranks about seventh; but I think we could be back up into the fifth or sixth place once we have everyone back in operation again.”

Highlights of the economic contributions of Indiana’s ethanol industry within the state are listed below.

 Job Creation – The ethanol industry created 4,146 new full-time jobs within Indiana. The industry directly employs 526 individuals and 6.88 additional jobs are created within the state for every direct job.  This is a total employment multiplier of 7.88.

Contribution to Indiana’s GSP – The ethanol industry contribution to Indiana’s GSP is $934 million.  This is limited to the Indiana ethanol industry – it does not include the economic impact that the overall U.S. ethanol industry has had on corn prices, farmer’s income, and farmland appreciation.

 Economic Activity or Sales within Indiana – The ethanol industry generated $2,881 million in ethanol, DDGS and corn oil sales in 2014.  This in turn generates $739 million in additional economic activity across other sectors and households for a combined economic activity totaling $3,620 million.

 Household Income – The increase of income to households directly or indirectly linked to ethanol production, including the impact farmers receive from a higher basis is $207 million.  Induced impacts of $108 million provide for a combined total impact on household income in 2014 of $315 million.

 State and Local Taxes – The ethanol industry generated approximately $44 million in state and local taxes in 2014.  A large portion of these taxes are property and sales tax.

Cropland Appreciation – Indiana’s cropland prices increased by an average of $52.50/acre, resulting in an equity increase of $635 million for farmers and rural residents.  If these croplands were sold, farmers/landowners will realize excess capital gains of $635 million just due to Indiana’s ethanol industry.

Ethanol Consumption and Fuel Cost Savings to All Consumers – Indiana consumed 314 million gallons of ethanol in 2013.  Of this ethanol demand, 13.3 million gallons was consumed via 228 retail E85 sales.  Lower ethanol prices relative to gasoline at the wholesale level resulted in savings to consumers of $148 million; that is, if this price differential is passed on to retail.

Investment in On-Farm Grain Storage – On farm storage capacity increased by 80 million bushels over the last nine years; this translates to $160 million in indirect capital investments.

A Lower Cost Feed Ingredient for Livestock – The effect of ethanol production in Indiana can have a net benefit of up to approximately $65.5 million across all species for livestock feeders able to utilize DDGS in their feed rations as a lower cost alternative for corn.  The savings are relative to states that do not have a comparable ethanol industry.

Additional Road Maintenance Costs – Increased trucking of the outputs from the ethanol plants leads to increased wear on Indiana’s roadways.  The estimated cost in 2014 for road maintenance from shipping ethanol, DDGS, and industrial corn oil by truck is $3.93 million.

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