Ethanol usage up, plants coming back online

Source: By SUE ROESLER, Lincoln Journal Star • Posted: Sunday, June 7, 2020

Dave Ripplinger
Dave Ripplinger, NDSU bioproducts/bioenergy economics specialist.

Cars are on the road again, and increased travel adds up to more gasoline being used across the U.S. Because of gasoline/ethanol blends, ethanol use is also on the rise.

“This is really good news as far as what is going on with the fuel/transportation sector, as well as ethanol,” said Dave Ripplinger, NDSU bioproducts/bioenergy economics specialist.

Just a few weeks ago, the ethanol market seemed to have bottomed out, with many corn ethanol refineries closed or operating at less than full capacity.

Corn growers were unsure of how much corn for ethanol to plant, as ethanol is a good market for growers across the state.

“We’re seeing gasoline use grow steadily off the bottom of a few weeks ago, and with that, increased ethanol use,” Ripplinger said.

Most ethanol in the U.S. sold as a blend – E-10 – and ag economists are watching to see if ethanol will hold up through the summer.

Looking at production, there is a “nice, steady decline in ethanol stocks, which is leading to a strong increase in prices.”

USDA reports South Dakota ethanol prices weekly. The simple crush for corn ethanol is now $1.25 per bushel. That is a good enough price to encourage refiners to re-enter the market.

“While markets are still paying the same for corn, the hope is with the increased ethanol use, they might be able to pay more to draw more corn to the refineries,” Ripplinger said.

The biggest change is the increase in ethanol prices, up almost 50 percent off the bottom in early-April, so that is “definitely good news.”

That is more than likely the signal that the ethanol market is improving, according to Ripplinger.

“More refineries may be coming online in the next few weeks,” he said. Because of that, corn stocks are starting to get used up.

However, there has been some less-than-encouraging news when it comes to corn for ethanol over recent weeks.

Great River Energy announced plans to shut down Coal Creek Station, which has a co-located ethanol plant, Blue Flint Ethanol.

Spiritwood Station, which is co-located with Dakota Spirit Ag Energy, will only be using natural gas in the future.

On the market side, distillers grains prices are declining.

“Corn is a little weaker and has to compete with distillers grains, and they are waiting for supply to come back,” Ripplinger said.

But due to the U.S. entering the driving season, typically there will be more travel and an increase in use.

“Partly, ethanol/gasoline use and increased driving is coming from opening up the economy and people needing to refill their tanks,” he said. “As driving picks up, things are looking more optimistic for gasoline and ethanol.”

There are still several signals that oil production needs to slow down or shut in.

Ripplinger said Cushing stocks have fallen and the percentage of storage used fell, as well.

“The Department of Energy’s Short Term Energy Outlook (STEO) forecast was optimistic on gasoline, ethanol and crude production and use,” he said. “They are confident in the market going forward.”

Congress is in discussion over the request to waive the Renewable FS for 2020.

The petroleum industry would like to see a waiver.

Currently, the HEROES Act, a new bill in the House, includes a payment for those who produce biofuel.

“We’re not sure where this bill will go, but it is up for discussion (in Congress),” Ripplinger said.

A long time in the works, funds are here and applications are available for blender pumps under the USDA Higher Blend Infrastructure Investment Program.

“We’re seeing a rollout of this program. North Dakota still has the largest number of blender pumps per capita per vehicle traveled by a wide amount through past funding from the North Dakota Corn Council,” he added.

In summary, Ripplinger believes there is more optimism in the ethanol market with travel coming back as the economy reopens.

“Things are moving in the right direction. We have simultaneously good news as plants are coming back online or just increasing their crush, as well as their profitability,” he said. “Additionally, there’s this expectation that for the next few weeks, we will see increased ethanol production.”