Ethanol Industry Needs Support, as COVID-19 Losses Near $4 Billion

Source: By Ken Colombini, RFA • Posted: Sunday, December 13, 2020

With COVID-19 cases on the rise again, state and local governments are taking additional actions to limit travel and promote social distancing. In turn, consumption of ethanol-blended gasoline is rapidly falling again, threatening to derail an already tenuous economic recovery in the ethanol industry. Through November, U.S. ethanol producers had already lost $3.8 billion since the start of the pandemic, according to a new analysis released today by the Renewable Fuels Association. In response to reduced travel and lower fuel demand, ethanol producers slashed production by 2 billion gallons between March and November, and cuts are expected to continue for months to come.

In the first week of December, consumption of both gasoline and ethanol fell to their lowest points since May, according to data from the Energy Information Administration.

“As Congress debates another COVID-19 relief package, we implore policymakers to consider the devastating economic impact the pandemic has had on renewable fuel producers,” said RFA President and CEO Geoff Cooper. “Our new analysis provides an in-depth look at how rural communities have suffered. The decrease in ethanol production has idled or permanently closed plants across the heartland and caused job losses in rural communities where good employment is often hard to find. As an industry deemed critical and essential to America, we call on Congress to act swiftly to provide some targeted relief to our nation’s renewable fuels industry.”

Cooper pointed out that U.S. ethanol plants are also playing a crucial role in combatting the pandemic by producing high-purity alcohol for hand sanitizer and other disinfectants, as well as capturing the CO2 needed to make the dry ice required for distributing COVID-19 vaccines. “But ethanol plants can’t help in the fight against COVID if they can’t keep their doors open,” Cooper warned.

According to RFA Chief Economist Scott Richman, who authored the white paper, the 2-billion-gallon cut in ethanol production meant a significant 700-million-bushel decline in the use of corn for ethanol. He stressed that while this report looks at a one time period, the effects of the pandemic will continue for a long time to come.

“Gasoline and ethanol consumption are still substantially below pre-pandemic levels, and it is likely that this will persist for a number of months,” Richman wrote. “Moreover, the winter is typically a time when ethanol prices are weak, and the decline in demand has already started to intensify pressure on industry margins.  As a result, the economic impact on the ethanol industry and, in turn, the agriculture sector is likely to deepen in the coming months.”

Richman’s new analysis provides an important update on earlier reports from April and July.

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