Analysis: U.S. Bankers Say, Love or Hate It, Ethanol Here to Stay
by Christine Stebbins (Reuters) …”Ethanol demand is the linchpin of the current pricing model that we have,” said Michael Swanson, agricultural economist at Wells Fargo, the largest commercial bank lender to U.S. farmers. “It’s a completely different question whether it’s right or wrong.”
…Farm bankers point to statistics on U.S. wealth and economic health that corn-based ethanol has driven – record-high farmland prices; a rise of some $500 billion in farm assets in the last five years; steady pay-downs of farm debt; a rise in farm assets in 2012 to an estimated $2.5 trillion dollars, based on real land not “paper,” and what those assets mean for U.S. money supply and economic demand.
…Leland Strom, chief executive of the Farm Credit System and regulator of the largest single lender to farmers, was blunt about any sudden suspension of the ethanol mandate: “I think it definitely would have an immediate impact weakening ag and rural America, especially in the heartland.”
… Aside from ethanol’s boost to land prices, bankers also cite two new industrial facts: oil refiners are now using ethanol by choice, not mandate; and ethanol plants are, as a byproduct, producing millions of tons of livestock feed called distiller’s dried grain (DDG) that has become a critical substitute for corn for cattle, hogs and poultry.
“The economics are such that you’re making money turning that corn into ethanol, turning it into DDGs. The folks blending it into gasoline are making money,” said Bob Young, chief economist at the American Farm Bureau Federation. READ MORE