Tharaldson Ethanol continues operations despite COVID-19

By Erin Voegele | April 16, 2020

Many ethanol plants have been forced to reduce or idle production capacity due to falling demand caused by COVID-19. Several plants, however, have continued to operate. North Dakota-based Tharaldson Ethanol is one example of plant that continues to operate at near capacity. 

Ryan Thorpe, chief operating officer of Tharaldson, confirmed his company’s 153 MMgy facility in east-central North Dakota is currently operating. “We’re still running,” he said. “It’s not fun times right now, but we’re finding ways to make it work.”

Thorpe said Tharaldson plans to operate as long as it can cover some of the plant’s variable costs. “We call it a contribution margin,” he said. “If you can keep that positive, then your run if you can cover some of your fixed costs.” Plants that shut down still have to pay those fixed costs, Thorpe explained, but are not getting financial contribution from running the plant.

Despite falling demand for liquid fuels and record high fuel ethanol stocks, Thorpe said the Tharaldson plant is running at close to 100 percent capacity. “The way the plant is designed, we operate the best and most efficient when we are producing the most amount of gallons,” he continued. “For the past 10 years we’ve figured out ways to [produce] faster and faster and faster.” Trying to find ways to efficiently slow production is difficult when you’ve worked for years to find ways to improve production efficiency and get more gallons out the door, Thorpe explained.

While ethanol sales at Tharadson have typically accounted for approximately 80 percent of revenue, Thorpe said that is currently not the case. Ethanol and coproducts each currently account for 50 percent of sales revenue.

As many ethanol plants idle and reduce production, Thorpe said Tharaldson has seen some increased demand for dried distillers grains (DDGs). Prices have come up a little bit as well, he said, noting the price of DDGs remains historically very strong.

With the plant remaining operational, Tharaldson is taking steps to help ensure employees remain healthy. The office has been closed to all non-employees. Plant management has also taken steps to ensure each department has dedicated space that is not shared, and is ensuring employees remain at least six feet apart. Break rooms and lunch rooms have been closed to aid in social distancing. “We make alcohol, so we have hand sanitizer everywhere,” Thorpe said, noting the company is also providing masks and gloves free of charge and encouraging employees to use them.

Thorpe said it is absolutely critical that Congress take steps to provide federal aid to ethanol producers. “Roughly half the plants in the United States are shut down due to the extremely poor margin environment,” he said. “I’ve been doing this now for 12 years and we’ve never seen anything like this. This is far and away the worst margins and the worst period we’ve had to endure. Any relief would be greatly appreciated, and at this point it’s going to become a necessity because unfortunately some plants might not survive this.”

Thorpe said margins have seen some improvements over the past 10 days as nationwide production has dropped. However, he said he doesn’t expect to see any significant margin improvement in the near-term, primarily because ethanol stocks are at historic highs.

He also said he expects to see additional production cuts. “I could see this eventually getting under 500,000 barrels per day,” Thorpe said, noting that gasoline demand is down 50 percent. “We’re going to see the same thing as far as ethanol production.”

Despite current challenges, Thorpe expresses optimism about the future. “We’ve been here for 12 years and we intend to honor all the contracts we have with our farmers,” he said. “We are still receiving corn, and even in a worst case scenario, if we would have to shut down, we would still arrange for delivery of that corn. It might be delayed a little bit, but we just want to make sure farmers know we are a survivor. We’ve been through tough times before, and we’re definitely going to make it through this one as well.”