U.S. ethanol production has hit an all-time low as COVID-19 has sapped gasoline demand, crushing the biofuel industry. Nearly 30% of the nation’s 204 biofuel plants have been idled since March 1, while many others have slashed production.
“The fuel market is just telling us to shut down and not operate,” said Randall Doyal, CEO of Al-Corn Clean Fuel in the southern Minnesota town of Claremont. “Economically, it’s abysmal.”
Al-Corn has kept the doors open, running at 38% of capacity and doing some minor plant rejiggering to produce ethanol for hand-sanitizer makers. “We might have enough business on the hand-sanitizer side to at least defray some losses,” Doyal said.
The ethanol industry’s woes also spell trouble for farmers across the Midwest. Ethanol makers consumed 36% of Minnesota’s corn crop in 2019, according to the Minnesota Bio-Fuels Association.
With so much biofuel demand erased, U.S. corn prices are near a 10-year low.
By federal law, most fuel sold as gasoline is required to have 10% ethanol. But gasoline demand has fallen off a cliff because of COVID-19 social restrictions.
The U.S. Energy Information Administration (EIA) said that as of the week ending April 10, the four-week moving average of U.S. gasoline consumption hit a low not seen in the 29 years that such data has been collected.
Ethanol production for the week ending April 10 hit its lowest level since the EIA began reporting ethanol output in 2010, according to the Renewable Fuels Association, a trade group.
Only 60 of the nation’s 204 ethanol plants were running full-tilt as of Monday, the association said. Another 71 ethanol were running below capacity, and 58 have been idled since March 1. (Another 15 plants had been idled before that date).
“Right now, we are watching the market closely,” said Jeanne McCaherty, CEO of Guardian Energy Management in Janesville, Minn., the largest of four ethanol plants in the state that have closed. “We would really like to open by June 1 — that’s our goal.”
Much of the ethanol industry has been floundering in red ink for more than a year, hurt by a supply glut and declining demand caused by trade restrictions and a flood of federal exemptions on ethanol use by smaller oil refineries.
One Minnesota ethanol maker, the Corn Plus co-op in Winnebago, closed in September; it was losing about $100,000 a week.
Now, with COVID-19 knocking out demand, ethanol prices have tanked, too, hitting record lows along with oil prices.
“You are better off not operating because you are losing money operating,” said Al-Corn’s Doyal. “But I am hardheaded, and I don’t like (shutting down) as an answer. We are owned by farmers, and they don’t like that answer either.”
Al-Corn, which employs 51, is one of the state’s oldest and largest ethanol producers, expanding its capacity in 2017 from 50 million gallons to 120 million gallons.
To help with the current crisis, Al-Corn began producing ethanol for the hand-sanitizer market about three weeks ago. The move came after the U.S. Food and Drug Administration relaxed alcohol production rules for hand sanitizer.
To meet even relaxed federal standards, Al-Corn had to install new piping and rent storage tanks to process and hold ethanol designated for hand-sanitizer makers, which isn’t treated with additives that go into ethanol bound for fuel markets.
“It’s helping — we’re shipping tanker truckloads,” Doyal said.
“At least we have kept everybody at work,” he added. “I have a very bone-deep belief that you don’t lay people off.”
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