OPINION: Support ethanol, now more than ever

By Emily Skor, CEO of Growth Energy | April 10, 2020

The plunge in biofuel demand sparked by COVID-19 is unlike anything our industry and rural communities have previously experienced. Between fuel demand dropping, government uncertainty, and an economic downturn driven by coronavirus – farmers and biofuel producers have been stretched beyond the breaking point.

Nearly half the industry may be offline within weeks. Without swift and decisive action in Washington, many more may soon halt grain purchases or close their doors completely. Such a spike in job loss and contraction in economic output is crippling to the rural communities and farmers that biofuel plants help support. To get a better understanding of the economic hardship confronting rural America, a look at the numbers is revealing.

Fuel demand has plummeted, and the benchmark Chicago Argo ethanol assessment hit an all-time low -- at :84.80 cents per gallon on March 30. S&P Global Platts reported that ethanol margins stand at negative 37 cents. As a result, the break-even price for plants to purchase corn has been pushed down 76 cents per bushel, according to the Farm Bureau, putting added pressure on farm income. 

Meanwhile, finding storage for the surplus is now one of the biggest factors impacting U.S. production. On April 8, the Energy Information Administration (EIA) reported an all-time high in ethanol stockpiles and a staggering 45 percent fall in demand from blenders and refiners compared to the previous year. The agency also noted the lowest ethanol production rate since 2009. On an annual basis, that we could see as many as 7 or 8 billion gallons of ethanol demand, or the market for approximately 2.4 to 2.7 billion bushels of corn.

The perfect storm created by COVID-19 has taken biofuel plants that were already on the ropes and pushed them over the edge. Among those who have announced impacts publicly, we’ve seen plants halt or slash production in at least a dozen states: California, Iowa, Idaho, Illinois, Indiana, Kansas, Michigan, Minnesota, Nebraska, Ohio, Oregon, and South Dakota. Just in the last few days, POET, the world’s largest biofuel producer, froze production at four plants that would normally purchase 110 million bushels of corn each year in Iowa, South Dakota, and Indiana.

At this point, no one fully knows what the final impact will be on corn and biofuel demand. It all depends on the course of the pandemic. We hope that we can reverse the course from this terrible virus, and that people can return to their normal daily lives sooner rather than later. But forecasts vary, and provide little reassurance to anxious farmers and producers.

What we do know, right now, is that jobs are at risk. This is a highly skilled workforce that rural America cannot afford to lose. We highly value our workers highly, and many companies are doing everything they can to keep their teams whole during this crisis. But resources are dwindling.

The recent $2 trillion relief package included some funding that may be helpful to rural communities, including a $23 billion boost to for the U.S. Department of Agriculture. But much more is needed to help for recovery and market growth for the biofuels industry and farm communities. We must rally together to ensure that policymakers act swiftly to expand markets for higher biofuel blends, lift regulatory barriers to vital markets, and ensure that financial assistance is available to farmers, workers, and rural businesses hit hardest by the crisis.

We want to protect our workforce, as well as the livelihoods of farm families that have already seen bankruptcies spike 20 percent over the past year alone. With plans to support the oil and gas industry already underway, it’s vital that policymakers give the same consideration to biofuel workers and farmers equally impacted by disruptions to the motor fuel market.