Despite E15 anniversary, ethanol plants struggle with drop in demand

Source: By Associated Press • Posted: Sunday, June 21, 2020

 It has been a year since President Donald Trump came to Iowa to celebrate E15, but the biofuel industry is asking for aid this summer to help it deal with the economic struggles brought on by the COVID-19 crisis and a variety of other items.

“To say that the last year has been a roller coaster ride for the industry would be an enormous understatement,” says Geoff Cooper, president and CEO of the Renewable Fuels Association in Washington, D.C.

Cooper and several other industry leaders talked to reporters last week as they marked the one-year anniversary of the president’s speech at Southwest Iowa Renewable Energy (SIRE), where he trumpeted the move to open the E15 market.

Despite the growth in that market, 2019 was a rough year for the industry, Cooper says. When the calendar turned to 2020, ethanol producers were just starting to feel more optimistic. They saw the slow growth of the E15 market, the signing of the phase 1 trade deal with China, the approval of the USMCA, and a court ruling regarding the EPA’s use of refinery waivers as all adding some momentum to the market.

But then Russia and Saudi Arabia began fighting over oil prices. That was closely followed by the COVID-19 crisis. Oil state governors began submitting waiver requests from the Renewable Fuels Standard. And the EPA appeared to be skirting the court ruling.

The industry went into crisis mode.

The economy now appears to be starting to recover, but industry leaders are still hoping for some type of aid from the government, Cooper says.

Mike Jerke, CEO of SIRE, says his company began making hand sanitizer and it is possible that may be a part of the business model going forward, but that product does not begin to replace the volume of the fuel market.

Scott Richman, chief economist for the RFA, says the volume of ethanol produced in April dropped by half. It has since partially recovered, but production of ethanol is still about 20 to 25 percent below last year’s figures. E15 volumes have also dropped, though only about half as much as E10 mixtures.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, says that it is important to remember that even if production gets back to even with last year’s figures, that doesn’t mean producers are back to a profitable situation. With production 25 percent below last year’s levels, producers are losing money.

The last COVID-19 aid package approved by Congress included $19 billion targeted to agriculture, but did not include any money specifically for biofuels. Cooper says Sen. Charles Grassley, R-Iowa, wrote language that would have added some aid for biofuels but it was not approved. Shaw says that industry leaders think U.S. Secretary of Agriculture Sonny Perdue has the power to provide aid to the industry. Perdue doesn’t agree.

Since the USDA is not providing assistance to the industry, the hope is that another aid package may be passed by Congress this summer and that it would include some aid for the industry.