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Ethanol production plummets as people drive less during pandemic

By
Jessie Higgins
Ethanol production dropped some 35 percent over the last month, according to the U.S. Department of Energy. File Photo by Mark Cowan/UPI
Ethanol production dropped some 35 percent over the last month, according to the U.S. Department of Energy. File Photo by Mark Cowan/UPI | License Photo

EVANSVILLE, Ind., April 14 (UPI) -- Ethanol plants across the country are shutting down due to greatly reduced demand for gasoline as Americans stay home to slow the spread of the coronavirus.

At least 44 of the nation's 187 plants stopped production last week as prices hit record lows, said Josh Roe, the vice president of market development and policy at the Kansas Corn Growers Association. Another 62 had scaled back production by at least 50 percent.

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Ethanol -- which is made from corn -- was trading at under 90 cents per gallon on Monday, down from nearly $1.50 at the start of the year, according to the Chicago Mercantile Exchange.

Industry groups expect production to continue to drop until more people begin to leave their homes and start to drive again.

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"We're not going to see ethanol production shut down entirely, because there is still demand," said Brian Jennings, the CEO of the American Coalition for Ethanol, an industry group based in South Dakota.

"But, I don't know how low production levels will fall. It will depend on how long the economy is ground to a halt," he said.

Demand for ethanol is closely tied to demand for finished gasoline. Federal law outlined in the Renewable Fuel Standard requires oil refiners blend a minimum percentage of biofuels into their petroleum products.

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Most of the finished motor gasoline sold in the United States contains at least 10 percent ethanol.

Demand for ethanol and gasoline are falling at about the same rate. Finished motor gasoline production dropped more than 40 percent between Feb. 28 and April 3, according to the Department of Energy. Ethanol production during that same period dropped about 35 percent.

"The United States has the capability to produce 17 billion gallons of ethanol annually," Jennings said. "We estimate that about 5 billion gallons of production have been shut off. So, we're currently at about 12 billion gallons of annual production as of early April."

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These amounts still will be plenty to supply enough renewable fuels to meet the Renewable Fuel Standard obligations, Jennings said.

But that does not mean the industry will get through this period unscathed, he said.

The vanishing production threatens hundreds of ethanol plant jobs. It's also delivering a major blow to the already weakened Midwest farm economy.

Roughly 40 percent of all the corn grown in the United States is used to make ethanol, according to the U.S. Department of Agriculture. Corn prices fell fast over the last month, dropping from $3.85 a bushel in early March to $3.30 on Monday.

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What's more, the closure of ethanol plants across the country means farmers are finding it difficult to sell their corn.

"Our local plant for corn is an ethanol plant," said Aimee Bissell, a corn and soy grower in Bedford, Iowa. "They've stopped buying corn. So, even if we wanted to sell grain, we couldn't to our local plant right now."

Bissell, like other farmers across the Midwest, is preparing to plant her 2020 crop. It will include hundreds of acres of corn that she may or may not be able to sell this fall.

She's not alone.

"The vast majority of farmers have already purchased their seed," said the corn growers association's Roe, who also farms corn and soybeans in Kansas. "I just don't see a big shift [in planting] happening, despite the drop in price. It's too late in the game for that.

"The only thing that will change this is for people to start driving again," he said. "If people started commuting to work again, that would have an immediate impact."

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