Ethanol industry contributes $2.34 billion to Minnesota economy

By Minnesota Bio-Fuels Association | May 08, 2015

Minnesota's ethanol industry accounted for $2.34 billion of the state's gross domestic product (GDP) in 2014, according to a new study by ABF Economics.

The study, which examines the ethanol industry's economic impact in Minnesota in 2014, concludes that the industry generated $7.6 billion in gross sales for Minnesota businesses and supported 18,630 full time jobs in the state last year.

This in turn generated $1.74 billion in household income in Minnesota in 2014 as well as $132 million to state and local government tax rolls.

"This study by ABF Economics clearly shows how significant the ethanol industry is to Minnesota's economy, especially in rural areas where it supports other industries," said Tim Rudnicki, executive director of the Minnesota Bio-Fuels Association.

The study was prepared by ABF Economics for the Minnesota Bio-Fuels Association.

For the study, ABF Economics estimated the impact of the ethanol industry on Minnesota's economy by applying expenditures by the relevant supplying industry to the final demand multipliers for value added output, earnings and employment.

"In this study, ABF used the IMPLAN (Impact Analysis for Planning) economic model to construct a model of the Minnesota economy including the sectors that support the ethanol industry, the links between them, and the level of economic activity," noted John Urbanchuk, managing partner for ABF Economics, in the study.

The IMPLAN model evaluated the gross output, value added (GDP), household earnings and employment generated by the ethanol industry in 2014.

In 2014, the study notes, Minnesota's ethanol industry spent $2.7 billion to produce 1.1 billion gallons of ethanol, 3.3 million tons of dried distiller's grains (DDGs) and 184 million pounds of corn oil.

The ethanol industry's expenditure included corn, industrial chemicals, electricity, natural gas, water, labor and services such as maintenance, insurance and general overheads. Spending for these goods and services represented the purchase of output of other industries that operate in Minnesota, ABF Economics said.

Jobs supported by the ethanol industry in 2014 included employment in ethanol production, agriculture, retail trade, healthcare, natural gas distribution, banking and finance, real estate, accounting, legal services, construction, wholesale trade and transportation.

The study also notes that a recent USDA study concluded that one ton of DDGs is the equivalent of 1.22 tons of feed consisting of corn and soybean meal.

 As such, ABF Economics said, the 3.3 million tons of DDGs (a high-protein animal feed) produced by the industry last year was sufficient to meet the annual feed requirements of nearly 2.5 million beef and dairy cattle, or the entire inventory of cattle and calves in Minnesota.

"Thus, given the availability of DDGs from ethanol production, the livestock and poultry industry require less grain corn and soybean meal to feed the same number of animals and produce the same amount of meat and dairy products," it said.

The full study can be found here.