Home News Michigan Ag News Ethanol’s Grim Outlook as Demand Diminishes, Talk of No Blending

Ethanol’s Grim Outlook as Demand Diminishes, Talk of No Blending

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The National Corn Growers Association released new analysis showing that cash corn prices have declined 16 percent. Some analysis is projecting a $50 an acre revenue decline for the 2019 corn crop.

“Depending on where you’re at within the state, you have seen a huge decrease on the cash price of corn—that goes to show how effective our biorefineries are in supporting our local corn prices,” said Jim Zook, executive director of the Michigan Corn Growers Association (MCGA). Typically during the spring, plants will shut down for maintenance. This particular year, many of those plants are remaining closed because margins aren’t there.

He said the drop has a lot to do with the decrease of ethanol usage. Since there are fewer drivers on the road, fuel demand has decreased by roughly half.

“In Michigan, we have two of our five ethanol plants running—running slowly, but they are running,” said Zook.

One small positive is the the Carbon Green facility in Lake Odessa has devoted some of their production into hand sanitizer. They’ve been able to keep people employed and cover some of the costs. However, Zook says until stay-at-home orders are changed, there won’t be an ethanol rebound.

“It is a difficult decision to make, but it is going to be essential we’re going to have to probably slowly start the economy,” he said. “Otherwise, there probably won’t be a lot of jobs for people to go back to, and then we have other issues to deal with. We hope we can make it through this.”

There are a couple of factors that could help the ethanol industry bounce back. Because of how interwoven the agriculture industry is, Zook says it could take several months.

“With the exports and being able to return to some normalcy for driving and live, that’s what it’s going to take in order to get us out of this,” he said. “We’ll hold here as long as there are still some animals being fed and slaughtered. That’s another thing that plays into this—it shows how complex agriculture is and how the rest of the country depends on agriculture to survive.”

USDA is providing some financial assistance for farmers through the Coronavirus Food Assistance Program (CFAP). Ethanol was not part of that aid package. Zook says they aren’t receiving same the lifelines as the oil industry. That could put ethanol industry in peril.

“We’ve got to make sure that we continue to have demand for the ethanol,” said Zook. “There’s talk about not having to blend ethanol in fuels, and that is going to be very detrimental to our ethanol. If that goes through, that is a death nail in the coffin.”