COLUMBUS, Ohio -- Ohio is lagging behind other major corn-producing states in the ethanol production race, but being in that position could be more lucrative for Ohio in the long term, says an Ohio State University Extension agricultural economist.
Matt Roberts, an assistant professor with the Department of Agricultural, Environmental, and Development Economists, said that the factors that are holding Ohio back in ethanol plant construction are the same ones that could create an industry boom.
"One of the reasons why we don't have more ethanol production is because our corn prices are higher than compared to the western corn-producing states -- historically 40 cents to 50 cents higher," said Roberts. "Another reason is because we are on the edge of the Corn Belt and are a natural supplier to dairy producers in the Northeast and pork and poultry producers in the Southeast. This has put us in a more competitive position than Western Corn Belt states and has made Ohio a less-than-desirable place for ethanol production."
Currently 110 ethanol plants are in operation throughout the country with an estimated 60 to 70 more plants being constructed. Of that number, only six are located in Ohio, with two expected to begin operation around harvest and the rest coming online sometime next year. By the end of this year, another two to four plants are expected to begin construction.
According to the Renewable Fuels Association, Ohio ranks 9th in the nation in ethanol production capacity, behind other Midwest states as Minnesota, Indiana, Illinois and Iowa. However, Ohio ranks 4th in ethanol plant production and expansion, and leveling corn prices and geographic location are some of the reasons behind the increasing interest.
"We've seen corn prices between Western Corn Belt states and Eastern Corn Belt states beginning to shrink, now a 20-cent or 30-cent difference. That's making Ohio a more attractive state to build ethanol plants," said Roberts. "Also, we have lots of cattle and when those plants begin operation, there are larger markets here for DGS (distillers grains and solubles)."
Close proximity to East Coast markets is also appealing as a source for ethanol production, said Roberts.
"It's cheaper to transport ethanol than it is to transport corn, so Ohio's transportation costs would be lower," he said. "Also, as a big consumer of ethanol, the more we can produce locally, the better off our local producers and consumers will be."
Roberts estimates that anywhere from 8 to 15 ethanol plants are planned for Ohio, and the slow start, compared with other states, is greatly attributed to the lack of tax incentives for production.
"The biggest difference between Ohio and other states is that, historically, the state government has not offered large tax incentives," said Roberts. "For example, Minnesota back in the '90s had a multi-year tax program that paid 85 percent to 90 percent of the construction costs of ethanol plants. Ohio just hasn't been given that large of an opportunity."
There have been benefits to waiting, though, said Roberts.
"The plants being built in Ohio are larger and have newer technology, and have cost the taxpayers less. But the downside is that there has been a lot of value-added agriculture we have not been able to take advantage of."