AMES, Iowa -- The presence of an ethanol plant improves the area’s job market, increases the economy and offers farmers competitive prices for their corn, according to David Swenson, Iowa State University economics researcher. Swenson answered questions about his recently completed study on the impact of ethanol plants on local economies.

What impact are ethanol plants having on Iowa’s job market?
One of the most prominent changes ethanol plants have brought with them so far is the tremendous increase in the job market. Close to 30 plants are operating right now, and 15 more are under construction. Soon 42 plants will be operating in Iowa with 1,900 jobs in the plants alone. Counting the support jobs created for the plants, there will be an astonishing 8,200 jobs boosting Iowa’s economy. These jobs range from basic labor, which requires no higher-level education, all the way up to senior level positions.

Who will get these jobs?
Grain handling and other jobs that involve moving material make up about one third of the workforce in the plant. The local workforce fills these positions. High-tech jobs such as engineers most likely will be filled from an outside workforce, as will senior positions such as plant managers. Higher-level positions will make the highest wages. All of the jobs available in ethanol plants pay at a very high rate for the Midwest, as do all the jobs linked to ethanol plants such as electricians. Additionally, linked job markets created by ethanol plants are some of the best in the state.

What is ethanol doing to the value of corn?
This additional use of corn is driving demand up at an incredible rate, benefiting grain farmers in the market. Higher corn prices have an adverse effect on ethanol plants by thinning out their profit margin. Higher corn prices also reduce the margins for livestock feeders. In order to process 2 billion bushels of corn per year, 55 ethanol plants would be required. Iowa just passed 2 billion bushels of corn produced last year, which means that even with the new plants in production, not all of the corn could be used for ethanol production. If this were the case, however, an estimated 10,500 jobs would be created in the ethanol industry.

Does size of the ethanol plant make a difference?
Scientists have done studies to determine the adverse effects of different sized ethanol plants on economies as well. One of the downsides to having a larger plant is the slower increase in job availability. A plant that doubles in size will only support 28 percent more jobs than it did before. The positive impact on the local economy, therefore, is only about 28 percent better. Communities tend to give ethanol plants long-term tax breaks as well. Increased truck traffic can have a negative effect on community finances through damage repair of area roads and bridges. Economists can help communities estimate potential long range costs and compare them to the benefits of a local ethanol plant. Even so, increased truck traffic still tends to annoy citizens, so there are other factors to consider as well.

Do we have enough corn to make ethanol and feed livestock?
A large amount of the corn produced in Iowa typically is used as feed for livestock. Byproducts from ethanol production still can be used to feed cattle, but is less suitable for pork and poultry diets. Coincidentally, Iowa has the country’s highest concentration of hog farms. Most of the large cattle concentrations are in the southern and western parts of the United States, so there is a mismatch between the demand for ethanol byproducts and supply. Additional non-corn sources for producing ethanol currently are being studied at a plant in Palo Alto County, but there is no production as yet. Biomass could be a better source, but not enough information is known at this point to say for sure.

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