Companies Idling Ethanol Plants in Nebraska, Minnesota on Weak Margins

Source: By Todd Neeley, DTN Progressive Farmer • Posted: Friday, December 21, 2018

Weak ethanol margins continue to put pressure on companies. (DTN file photo)

Weak ethanol margins continue to put pressure on companies. (DTN file photo)

Two major ethanol companies reportedly have started idling production at plants in Nebraska and Minnesota, and one of those companies has started laying off employees.

Pacific Ethanol Vice President Paul Koehler confirmed to DTN on Thursday the company’s plan to scale back production at a plant in Aurora, Nebraska.

“Pacific Ethanol has idled the 45-million-gallon per year Aurora east plant due to the negative-margin market conditions current in the ethanol industry,” he said in an email. “We also laid off 26 people, which represents about one-third of the workforce at the Pacific Aurora campus.”

In addition, earlier this week Reuters reported Green Plains Inc. decided to idle its 55-million-gallon ethanol plant in Fergus Falls, Minnesota, because of weak margins. Green Plains did not respond to DTN’s request for information.

DTN has reported in recent months, based on our hypothetical 50-million-gallon ethanol plant, that many producers may be experiencing very low and even negative margins as ethanol prices have hit some of their lowest levels in nearly a decade.DTN Energy Editor Brian Milne said oversupply in the ethanol market has the Chicago market swamped.

“Weekly plant production consistently outruns U.S. blending demand by more than 100,000 barrels per day,” he said, “and export volumes are not making up for the shortfall.”

Milne said implied gasoline demand is up a modest 53,000 bpd or 0.6% this year through Dec. 14, capping domestic growth in blending.

“The bottom line – the industry overbuilt, keying off RFS2, with the federal demand mandate weakened against statute because the U.S. transportation fuels market can’t accommodate more renewables unless there is a change in the gasoline specification requirement that allows greater than 10% ethanol.”

The EPA has indicated it will released a proposed rule in February to allow for year-round E15 sales.