The following report was prepared by the Iowa Renewable Fuels Association (IRFA) on June 13, 2008. Much of the information is from the production facilities or field reports. IRFA is not able to independently verify the information. Further, IRFA has not been able to contact every Iowa facility, so we do not present this as a fully complete report on the situation. No company specific information will be disclosed.
IRFA estimates that over 300 million gallons (annualized) of ethanol production is currently off-line. If predictions of river cresting into early next week prove correct, that number could grow to over 400 million gallons. Even as the rivers recede, based upon the reports we've received, it could likely be some time before production can return to normal levels.
IRFA is unaware of any biodiesel production being disrupted due to flooding. Several ethanol and biodiesel plants experienced small disruptions due to lightening and power outages, but nothing significant has been reported.
No ethanol or biodiesel refinery has reported a disruption of feedstock supply that will impact operations. Several livestock processors, who supply animal fats for biodiesel production, have shut down. While there has been no impact on feedstock supply yet, this situation will be monitored.
Clearly, logistics have been hampered with numerous road and bridge closings, but they are being worked around. Ethanol plant shutdowns have reduced corn demand by more than 300,000 bushels per day.
Given the inherent flexibility of biofuels distribution (rail, truck, barge), no plants have reported an inability to ship fuel to destination markets. However, railroad operations have been greatly impacted by the flooding. Delays are widespread. At least one bridge has collapsed on a rail line that services several ethanol plants. Also, many highways and I-80 have been/will be closed. These are serious challenges and will impact shipping routes and duration. At this time, however, we do not expect any significant supply disruption to end markets.
Operating plants are reporting a significant spike in orders for distillers grains. It is likely that interstate shipping disruptions of feed products combined with some corn processing plant closings in Iowa has increased the Iowa demand for distillers grains.
Perhaps the biggest impact on biofuels producers from the floods has been the dramatic escalation in commodity prices. As under-regulated hedge funds speculatively drive prices upwards, the impact is felt by biofuels producers, livestock farmers, and many other sectors.
Conference attendees confirmed the overwhelming consensus from last year that it is essential to continue the ongoing dialogue to ensure that the international regulatory community can work collectively to combat commodity market manipulation and other market abuses, and to share information and expertise. The conference and the CFTC's related energy market initiatives reflect its continued efforts to work with fellow regulators to enhance oversight of the energy futures markets worldwide.