As uncertainty about the general economy continues to rise, one result could be of concern to the ethanol industry: the weakening U.S. dollar.
 
 Historically, the U.S. dollar has experienced an incremental downturn decade by decade. It is the economy's natural response to a trade imbalance. How will this affect the ethanol industry? One result that affects all existing corn-based ethanol producers is the rising corn export market. In addition to high corn prices, this rise in international corn demand could be problematic for producers, according to John Ewen, senior vice president of investment banking for Ardour Capital Investments LLC. "Of the commodities that the corn ethanol plants themselves are exposed to on the input side, a weak dollar is generally not positive for their business," Ewen says. "The 2 billion-bushel corn export market is even more sought after now. Because of the weak dollar, our corn looks like a bargain from an international standpoint."
 
 In addition, although most ethanol producers are currently earning profits through the domestic market, the United States could become a net exporter of ethanol in the future, according to Kermit Nash, officer with Minneapolis-based law firm Fredrickson & Byron. "What I see is an increased look at marketing ethanol internationally," he says. "If you look at ethanol as a commodity and a product that would be useful for trade, people are going to start looking internationally at how we get ethanol off of the shore."
 
 The weak U.S. dollar also impacts project development, particularly through the increased cost of building materials, such as stainless steel, because much of the materials come from other countries, according to Nash. "If we were to buy [stainless steel] here, we're paying for it to be sourced from somewhere else (outside the United States), and in turn, we'd be paying a premium for those goods," he says. "Because some of the larger builders aren't buying in large volumes like they were before, they can't leverage buying power because they're not as busy as they were in the past."

 
 Meanwhile, a weak U.S. dollar hasn't dampened foreign investor appeal because foreign currency is valued more in the United States, according to Nash. Even with an unstable credit market—both domestically and internationally—equity investments continue to be coming into Wall Street banks amid regulatory and monetary policy changes imposed by the federal government, which influences internal policies for lending and credit. "The credit market hasn't leveled out, so we're seeing an uptick in the involvement of larger or parent banks looking at projects in the U.S.," Nash says. "The credit market has affected the world, no question."
 
 Like ethanol, the U.S. dollar is a commodity that is susceptible to cyclical downturns in terms of its value, whether domestically or internationally. Despite its current shortfalls, optimism remains underpinned by positive state and federal regulatory support, along with project ingenuity that could ease the bearish condition on the weak U.S. dollar. "Whether it's an infusion of foreign equity or debt sources for funding projects, or even the extra effort by some of the larger ethanol producers to find ways to make projects work, I wouldn't be depressed about the market at all," Nash says. "There are certainly a number of sites that have a lot of strengths and technology improvements that will continue to get financed in order to endure the tough economics, regardless of the devalued U.S. dollar."
 
 —Bryan Sims

Impacts of the Weak U.S. Dollar

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Upcoming Events

National Carbon Capture Conference & Expo

2024 International Biomass Conference & Expo

2024 International Fuel Ethanol Workshop & Expo

Biodiesel Summit: Sustainable Aviation Fuel & Renewable Diesel

Carbon Capture & Storage Summit

Impacts of the Weak U.S. Dollar