Iowa study indicates extensive impact of ethanol on U.S. rural economies

WASHINGTON – A recent study conducted by researchers at Iowa State University highlights the ethanol industry’s impact on the economy.
While the study focuses solely on Iowa’s ethanol industry, a leader from the National Corn Growers Association said the findings provide insight into the significant economic impact ethanol has on rural communities across the nation.
The study by Iowa State economists Paul Gallagher and Dan Otto examines the economic effect of the 14 operational ethanol plants in Iowa, as well as the nine plants under construction in the state.
Corn Belt phenomenon. The report concludes Iowa’s ethanol plants are projected to add $3.9 billion to the state economy. Ethanol is having a similar effect on the economies of states throughout the Corn Belt, said Daryl Haack, chair of the association’s Ethanol Committee.
“We’re getting to the point where the amount of corn ground by farmer-owned ethanol plants is about equal to the amount processed by the big wet-mill plants,” he said. “And when those farmer-owned plants pay dividends to their investors, those farmers turn around and spend that money in the local area.”
Jobs growth. According to the study, the Iowa plants are expected to generate $16 million annually in state tax revenue and generate more than 5,100 direct and indirect jobs.
On an annual basis, Iowa ethanol producers are projected to spend about $910 million on corn, $161.1 million for other inputs, $203.7 million on energy and $82.4 million on wages.
Haack said the ethanol industry has a ripple effect through the local economy. He used the Little Sioux Corn Processors plant in Marcus, Iowa as an example.
“When the Marcus plant was in the planning phases, we knew there would obviously be a positive impact on the trucking industry in the area,” he said. “But what we didn’t realize was that there would also be an impact on the local auto repair businesses that work on those trucks. Those auto repair businesses are doing quite well and it all ties back to the ethanol plant.”
Iowa a leader. Iowa, which recently overtook Illinois as the nation’s top ethanol-producing state, is expected to produce more than 1.335 billion gallons this year, the report states. That amount is more than the entire U.S. ethanol industry produced in 1996.
Haack said about half of Iowa’s ethanol output in 2005 will come from farmer-owned plants. According to the Renewable Fuels Association, 81 ethanol plants nationwide have the capacity to produce nearly 3.6 billion gallons annually. There are 16 ethanol plants under construction and two major expansions under way, constituting a combined annual capacity of more than 750 million gallons.