AgDay Analysis: “The Ethanol Industry Has a Problem”

04:31PM Mar 25, 2020
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Ethanol plants throughout the country are shutting its doors or limiting hours. It’s partly due to the coronavirus (COVID-19). Yet, there are other factors at play which include less demand for ethanol and gasoline. There’s also a price battle overseas.

“The ethanol industry has a problem here,” says Ted Seifried with Zaner Ag Hedge. “Corn demand for ethanol has a problem here.”

Seifried is concerned there’s a “black cloud” hanging over the corn market because of it. He says ethanol is one of the biggest “casualties” over the last two weeks because of COVID-19 but that’s not the only reason.

“The energy markets as a whole are taking a big hit,” says Seifried. “On top of that, throw Saudi Arabia and Russia having a price war and really involving [The United States] with that too. Crude oil [is] hitting lows that we haven’t seen since 2001.”

Seifried says corn basis is dropping dramatically and ethanol plants are shutting down.

POET, one of the nation’s largest ethanol producers, says it will stop buying corn at some of its facilities. POET says experts are projecting a 957,000,000 gallon drop in ethanol demand from this month through May, adding up to a 331,000,000 bushel loss in corn demand.

In a statement to AgDay, a POET representative said, “POET has temporarily paused corn purchases at a number of locations, and we are actively evaluating biofuel production levels to reflect falling gasoline demand.”

The Renewable Fuels Coalition is launching a campaign. The coalition is calling for the Environmental Protection Agency not to appeal a court decision regarding biofuel waivers.

Earlier this year, the U.S. Court of Appeals for the 10th Circuit ruled exemptions granted to three refineries overstepped the EPA's authority because those refiners had not previously been granted waivers. The coalition saying between the virus, trade disputes and the small refinery exemptions, now is not the time for the Trump Administration to take any action that would cause further pain for ethanol producers or the farmers that supply them.

Watch the analysis here.


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