Ethanol makers squeeze more profits from corn by-products

Ethanol manufacturers are looking to wring more profits from their operations as demand for corn-derived ethanol is stagnating. Gasoline consumption has been sluggish and the 2012 drought drove up corn prices. Carmakers have been resistant to proposals to increase gasoline/ethanol blends beyond their current 10 percent. EPA requirements call for 13.8 billion gallons of ethanol to be blended with gasoline in 2013, a 4.5 percent rise from 2012, but the US Energy Information Administration expects ethanol consumption to increase less than 1 percent in 2013.

To counter tepid demand, and shield themselves from cyclical market swings, ethanol makers are looking at ways to wring more profits out of a kernel of corn by making use of every part of it — starch, protein, fiber, and oil, according to The Wall Street Journal.

Some companies modify dry-mill ethanol plants to produce corn oil, which can be used to make animal feed or as a feedstock for biodiesel fuel. Ethanol producer POET, LLC is developing a corn-derived fiber product that can be used to up the fiber content in cereals, baked goods, and other food products. A protein by-product in corn processing can be used to make packaging, adhesives, and coatings.

POET believes that within five to ten years the company may get as much as 40 percent of revenue from corn by-products compared to just 15 percent now. However, industry watchers note that with diversification comes risk. Some by-products may only serve niche markets with limited potential for growth. Others, such as the corn protein used to make packaging, compete with well-established products that are often cheaper.

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Photo by Danelle Bailey, used under a Creative Commons license.

James Bryant

James Bryant is a writer and editor for the First Research team at Hoover's.

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