Ethanol manufacturers faced with slowing growth in demand are turning to the corn oil market to help boost revenues, according to a report in the Wall Street Journal.  Several of the nation’s largest ethanol companies, including Green Plains Renewable Energy and Valero Energy, have invested in equipment to produce the oil.

Extracted during the production of ethanol, corn oil from ethanol is mainly used to make animal feed and biodiesel, but it also can be refined for cooking.   The volumes ethanol producers plan to make are expected to be small compared with the two-billion-gallon U.S. market for soybean oil.  The new market thrust adds an important revenue stream for ethanol makers that face flattening demand, historically high corn prices, and volatile energy markets, the Wall Street Journal said.

Ethanol production has been profitable throughout 2011, with the Renewable Fuels Association projecting production at a record 13.7 billion gallons. Still, the rapid gains in demand are seen as slowing. The industry is nearing 15 billion gallons, the annual amount that federal law requires refiners to blend into gasoline by 2015. Further gains past the federal mandate are hampered by weakening support in Congress, concerns over the effects that increased ethanol use would have on older engines, and changes that gas stations would have to make to their pumps.

Green Plains Renewable, after making a $20 million investment in 2010 to produce corn oil, projects between $30 million and $40 million in new, annual revenue from the liquid. Producing corn oil is “low-hanging fruit,” the company’s chief executive, Todd Becker, said.  Other large companies, including South Dakota-based Poet LLC, the world’s largest ethanol producer, and Valero, are adding similar equipment to their existing plants. The investments are a natural progression for the industry, said Jeff Lautt, Poet’s president, whose company is in the midst of an effort to diversify revenue.

Ethanol plants have a ready buyer in the biodiesel industry, which can use either corn oil or soybean oil in production.  And, corn oil currently sells at a discount to soybean oil.  Although increased corn-oil production provides added competition for soybean-oil makers, it is not likely to saturate the market, industry officials said. Even if all producers adopted the technology this year, total output would be under 270 million gallons, Becker,  Green Plains Renewable, said.