Forget Food and Fuel: America’s Corn Is Worth $125 Billion to This Industry

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February 16, 2015

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by Maxx Chatsko (Motley Fool) While the most arguments typically center on the “food vs. fuel” debate, most corn produced in the United States never actually becomes food. Consider that 44% of last year’s harvest went to animal feed, another 44% became ethanol fuel, and the remaining 12% went to “other” uses that included food and sweeteners, according to data compiled by the U.S. Department of Agriculture.

That may come as a shock to most people, but we’re not done yet. As it turns out, American corn may be most valuable when used by biotech companies.

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The industrial biotech sector represented over one-third of the national bioeconomy in 2012. What the heck is that? The bioeconomy is all economic activity generated from products and services that rely on biotechnology. Entrepreneur/writer/investor/thought-leader Rob Carlson, who has the not-so-envious task of tracking the data, has organized the bioeconomy into three parts:

Biotech seeds: agricultural crops that benefit from new genetic traits.
Biologics: pharmaceuticals derived from biotechnology instead of synthetic chemistry, including six of the eight best-selling drugs in the world in 2013.
Industrial biotech: chemicals, fuels, and foods produced from fermentation and microorganisms instead of petrochemicals.

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The most visible partnership is with Solazyme, which uses algae to produce cosmetics, drilling lubricants, and vegan protein replacements and food ingredients. Archer Daniels Midland currently leases a 20,000 metric ton per year production facility to Solazyme and supplies the raw corn.

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Pressure to increase profitability bodes well for increased investment in Industrial Biosciences, which captured the second highest profit margin (16%) after DuPont’s Agriculture segment (24%) in 2014.

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A 30 million gallon per year cellulosic ethanol facility in Iowa will begin operating in 2015, while a 50/50 joint venture with BP to produce butanol fuel end up replacing ethanol altogether. Coupled together, the two projects could be just the beginning of a growth-driving effort in next-generation renewable fuels. READ MORE

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