Ethanol Issues

The Associated Press had an informative article about the connections between corn harvests and ethanol production.  

Given that corn is the main input in U.S. ethanol production, plentiful and cheap corn is essential.  The drought of 2012, that heavily impacted major corn producing states, led to 20 of the nation's 211 ethanol plants stopping production.  The drought led to lower corn yields and higher prices - these higher prices make ethanol production unprofitable.  The AP article notes that approximately 10 percent of the nation's gas comes from ethanol but that the impacts of the plant shutdowns should be minimal due to large stocks of ethanol.  If yields do not rebound in the coming years however the industry could be hit hard.

Increased production of ethanol is part of the reason that more energy in the U.S. has been sourced domestically over the past decade.

The chart below from EIA provides some specific data on the margins that ethanol plants are experiencing.