Home News Michigan Ag News Ethanol Industry Enduring More Headwinds as Stocks Reach New All-Time High

Ethanol Industry Enduring More Headwinds as Stocks Reach New All-Time High

Indiana Has A Proud Ethanol History-media-1

Between historic floods, trade wars, and waivers, the ethanol industry came into the COVID-19 pandemic under duress.

The latest numbers from the Energy Information Administration (EIA) shows that more than 5 billion gallons of ethanol has been lost, totaling roughly a 45 percent drop in demand from COVID-19.

“Now you’ve come into a situation where you’ve got plummeting fuel demand that takes so many plants beyond the breaking point,” said Emily Skor, CEO of Growth Energy. “They’re running so they can fill contracts, they’re running so they can employ people. Any plant that’s running today is losing money.”

The report from EIA also showing that ethanol stocks are at an all-time high. With the drop in demand, Skor says that production might soon halt because there’s no where to store product. When the country is back on the mend, the ethanol industry will ramp up slowly.

“We’re going to have to bring those stockpiles down,” she said. “We’re going to have to see driving pick up. We’re also going to have to see what takes place globally—when their demand starts going up and when they start receiving imports. Our global exports have been impacted by this as well.”

There has been a lot of public conversations around ethanol co-products like DDGs and alcohol. Skor says DDG demand for livestock producers is still strong.

“As ethanol production goes down, DDG production goes down as well. Those livestock producers, they absolutely need access to the protein, so that’s an area to benefit the producer because the demand remains high.

There’s also demand for alcohol to be used in hand sanitizer production. The FDA softened guidelines for ethanol producers to manufacture hand sanitizer. The revenue isn’t enough to offset the loss on the fuel ethanol side, but Skor says the plants are proud to play a role in the public health response.

“The challenges are so [weighted] to the ethanol side, it’s incredibly difficult for any ethanol producer to just break even right now.,” said Skor.

Last week, a coalition of Senators and Representatives each wrote letters to USDA. They requested that a portion of funds received by the CARES Act be allocated to the ethanol industry.

“USDA is receiving a flood of requests to support every aspect of the ag sector—more requests than they typically get,” said Skor. “Unfortunately, what’s going to happen is USDA is not going to be in a position to help everybody, and that’s what’s being channeled back to us through our conversations right now.”

In a report from S&P Global Platts, it’s estimated that plants are losing an average of 37 cents per gallon.