Missouri ethanol production capacity is expected to reach 500 million gallons in 2008, adding an estimated $1.17 billion to the state’s economy annually, according to a study released by University of Missouri economists.
The study, conducted by MU agricultural economists Vern Pierce, Joe Horner and Ryan Milhollin, accounts for all direct, indirect and induced economic effects of constructing and operating the state’s ethanol production facilities. The new study updates a report released in February 2006.
“This industry is growing so rapidly, we had to revise our study,” Pierce said. “Last year, our highest projected production capacity was 350 millions gallons in 2008. Now, it’s 800 million gallons in 2009. It’s growing that fast.”
Currently, Missouri ethanol plants produce about 160 million gallons annually with an estimated economic impact of $522 million to the state and an additional $43 million generated in federal, state and local taxes, Pierce said.
“This is a great industry for Missouri,” he said. “We have corn producers with more money in their pockets, and that means more money in small towns all over Missouri. It goes beyond just the corn farmers.”
When annual ethanol production reaches 500 million gallons, an estimated 177 million bushels of corn would be used to produce the fuel, increasing the value of the state’s corn crop at the farm level by $76 million, Pierce said.
“That’s $76 million new dollars in the pockets of Missouri corn farmers,” he said. “That level of production also will support more than 7,700 jobs across the state, generate more than $110 million in taxes, and produce 1.42 million tons of distillers grain that could feed more than 1 million beef cattle.”
Other grain producers also would experience increased profitability as fewer acres are planted to soybeans, wheat and rice, resulting in higher prices for those crops. However, direct involvement in agriculture isn’t a prerequisite to benefit from ethanol’s economic engine, Pierce said.
“A large percentage of ethanol plants are being invested in by local farmers, and they’re keeping the profits in their communities, bringing it back to Main Street and not sending it to Wall Street,” Pierce explained. “Those profits ripple through the community. Equipment dealers, feed suppliers, veterinarians, grocers, retailers, car dealers — they all benefit.”
Increased tax revenues also would allow for more local investment in schools, roads and other infrastructure. “A 20-year-old man living in Laddonia, Mo., and working at a factory in Mexico, Mo, will benefit — even if he doesn’t grow corn or work at the ethanol plant,” Pierce said. “It’s increasing economic value for the entire community.”
Pierce acknowledged that ethanol’s increased demand for corn would likely push consumer prices for meat, eggs and dairy products higher as increased livestock feeding costs force producers to reduce their herds and production.
“But I’d argue that the cost of paying a little more for a steak or gallon of milk is worth it if it means I can buy it at my local, hometown grocery store that’s still in business because of the ethanol plant,” he said. “These ethanol plants are going to be built somewhere in the U.S., and Missouri can capture the value of turning our corn into ethanol instead of exporting the raw commodity to other states.
“There’s also still a tremendous opportunity for our livestock producers to benefit from the use of distillers grains. Livestock infrastructure wrapping around ethanol plants will grow to take advantage of these feedstuffs grains, adding more economic impact.
“Ethanol provides opportunities for new wave of agricultural diversification off the farm.”
Complete findings of the study, which was funded through an unrestricted grant from the Missouri Corn Growers Association, are available on the MU Commercial Agriculture Web site: http://agebb.missouri.edu/commag/.