COVID-19 lowers corn demand, ethanol price

Source: By Lisa Gibson , Ethanol Producer Magazine • Posted: Tuesday, March 17, 2020

A report from University of Illinois Extension shows weak demand for corn for ethanol use, in the middle of the COVID-19 pandemic. Production will fall dramatically, it predicts.

“Estimates of a 15 to 20 percent reduction in gasoline use seem to be the expectation for many industry analysts over the next couple of months,” the University of Illinois report says. “While weekly estimates of ethanol production continue to show more than a million barrels a day through March 6, the prospect of reduced ethanol production looks certain. If gasoline consumption falls by the expected amounts over the next two months, corn used for ethanol production may lose 120 million to 170 million bushels.”

In the midst of reduced consumption and production, the price of ethanol was as low as $1.03 Monday.

Emily Skor, CEO of Growth Energy, told Ethanol Producer Magazine, “Biofuel producers are under desperate strain. Between fuel demand dropping, government uncertainty from refinery exemptions, and an expected economic downturn driven by Coronavirus, a vast number of plants are operating in the red right now and according to the new analysis from University of Illinois, the next two months will continue to be challenging as a result. This is unlike anything we’ve seen before.”

The University of Illinois report says corn prices will reflect continued uncertainty surrounding economic outcomes from measures to combat the outbreak in the short term. “A severe economic contraction leading to a global recession opens the way for continued weakness in prices,” it says.

Geoff Cooper, president and CEO Of the Renewable Fuels Association, released a statement on the ethanol industry Monday, in agreement with Skor in saying the pandemic, oil price war, trade disputes and small refinery waivers are all working against it. “While the policy response to turbulence in the energy markets has so far focused largely on supporting crude oil producers, we urge the Administration to recognize that biofuel and agricultural commodity markets are suffering as well,” he said. “Ethanol futures prices hit a record low in recent days, as the coronavirus is expected to negatively impact domestic and international fuel demand in the near term. With many ethanol plants on the verge of shutting down, we implore the Trump administration to take action that equitably supports all liquid fuel industries—including ethanol producers—during this time of unprecedented market uncertainty and unrest.”