The Renewable Fuels Association estimates the nameplate capacity of current bio-refineries at 14.875 billion gallons, with an additional 165 million gallons of new construction or expansion underway. Translating that capacity into maximum potential for corn consumption is not straightforward for at least three reasons. First, it is possible for refineries to produce above nameplate capacity. Second, feedstocks other than corn are used in some refineries.Third, there is a variation in the estimates of yield of ethanol per bushel of corn processed into ethanol and the yield can vary by the intensity of use relative to nameplate capacity. As a result, estimates of maximum corn consumption vary.
The most recent private industry survey (for the year ended June 2013) revealed an average industry yield of 2.72 gallons of undenatured ethanol per bushel of corn. Assuming total nameplate capacity of 15.04 billion gallons of ethanol and recognizing that production can exceed nameplate capacity (but that not all feedstock is corn), corn based ethanol production capacity might be near 15.2 billion gallons. With a yield of 2.72 gallons per bushel, maximum corn consumption for ethanol would be 5.588 billion bushels. That compares to the USDA projection of 5.0 billion bushels for the current marketing year.
There is a bit more to the story, however. A co-product of ethanol refining is a variety of distillers grains solubles (DGS) that are used as livestock feed. Those solubles substitute for other feed ingredients, mostly whole corn. The same private survey cited above indicated that an average of 16 pounds of livestock feed is produced for each bushel of corn refined. That is, for each bushel refined, 0.286 bushels are available to substitute for other feed ingredients. If, for example, 80% of those solubles substitutes for whole corn, then 0.229 bushels of whole corn are replaced (domestically or internationally) for each bushel of corn refined into ethanol.
Using that relationship, the net consumption of corn from ethanol production can be calculated. Processing 5.0 billion bushels of corn into ethanol would represent a net use of 3.855 billion bushels [5.0 - (.229 X 5.0)] and processing 5.588 billion bushels would represent a net use of 4.308 billion bushels. Under the assumptions made here, moving from 5.0 billion bushels of corn processed into ethanol to the maximum industry capacity of 5.588 billion bushels, then, would result in a 453 million bushel net increase in corn consumption rather than a 588 million bushel increase.
Ethanol is expected to continue to be a large and likely growing segment of demand for U.S. corn, suggesting that corn prices could be supported at higher levels than expected during a period of more abundant supplies. However, there is a limit to growth without motivation to expand corn-based ethanol production capacity.
Also available at: http://farmdoc.illinois.edu/marketing/weekly/html/022414.html