Capital Needs of the U.S. Renewable Fuels Industry

A study released last month by the Farm Credit Council has identified the required private capital investment necessary for the renewable fuels industry to achieve the production goals established in the proposed Energy Bill.

According to John Urbanchuck, a leading analyst of the biofuels industry and author of the report, the capital cost to meet the 36 billion gallon renewable fuels target by 2022 amounts to $105.5 billion (2007 dollars). The report looks at the contribution of capital to the renewable fuels industry by the Farm Credit System.

“Providing the Farm Credit System with greater flexibility to support the financial requirements of the biofuels industry by enabling them to provide financing to a wider range of borrowers will facilitate ethanol and biodiesel industry expansion and achievement of the national renewable energy goals established by Congress,” writes Urbanchuck in the study.

The Farm Credit System has been a major source of financing for the ethanol industry for well over a decade and reported, at June 30, 2007, $1.668 billion in loans outstanding relating to biofuels products and another $2.238 billion in loan commitments to extend credit to the industry. These outstanding loans represented 1.3 percent of the Farm Credit System’s total loan portfolio.

The report shows that the Farm Credit System’s support for the ethanol industry over the years has helped provide $23.2 billion in gross economic output, $5.5 billion in household income and 136,345 new jobs in the construction of ethanol plants; $317 million in annual transportation revenue to ship ethanol; $24.8 billion in gross economic output, $3.6 billion in household income and 99,188 new jobs in the operation of the plants; as well as $4.3 billion in annual farm revenue for corn to make ethanol.

To read the full report, see the link provided.

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