Ethanol industry suffering like refinery operators

 

 

The nation’s ethanol industry could take a $10 billion hit over the coronavirus pandemic according to the Renewable Fuels Association. Ethanol plant operators are experiencing some of the same pains felt by refineries.

Details came this week in the Oklahoma Farm Report which indicated it will have an impact also on corn growers.

As the COVID-19 pandemic and crude oil glut continue to ravage world fuel markets, U.S. ethanol sales in 2020 could fall by more than $10 billion and the industry’s contribution to gross domestic product (GDP) could drop by nearly one-third, according to a new analysis released today by the Renewable Fuels Association (RFA). The economic losses stem from a “pernicious combination of steep production cuts and sharply lower prices” in response to COVID-19 stay-at-home orders and the resulting collapse in fuel consumption, according to the report.

RFA warned that these economic damages go far beyond the ethanol sector. America’s farmers will also be negatively impacted, as ethanol typically provides a market for two out of every five rows of corn and more than one-third of the annual sorghum crop. Meanwhile, the industry normally supports 350,000 jobs across all sectors of the economy, and contributes valuable co-products like distillers grains, corn distillers oil, and captured carbon dioxide to the food supply chain.

Building on the results from a recent Purdue University study, the RFA analysis estimates that ethanol production could fall by approximately 3 billion gallons in 2020, representing a nearly 20 percent cut from levels that would have otherwise been expected. Mainly due to lower usage and high inventories, ethanol prices could be 56 cents per gallon lower on average from March to December than they otherwise would have been; as a result, ethanol sales fall to $12.5 billion in 2020, a 46 percent reduction from the $23 billion that would have been expected absent COVID-19.

Source: Oklahoma Farm Report