Nebraska Ethanol: Tough Time for Industry to be Profitable

Source: 10/11 News • Posted: Wednesday, February 27, 2013

Nebraska Ethanol Board Administrator Todd Sneller says there’s a fine line between making money and losing money in the ethanol industry.

“Right now the profitability of ethanol is not particularly good, it’s been a prolonged period of almost break-even sort of margins, and a few cases where plants maybe were trying to deal with some debt as well,” says Sneller. “It’s just not been profitable to produce ethanol for some of those.”

Six of Nebraska’s 25 plants are idle.

Nebraska Corn Board member and farmer Curt Friesen says that makes it tough for farmers who have been selling their crops to those plants.

“We look at the price alone and they’ve probably added 20-25 cents to base here in the Midwest to our corn price,” says Friesen.

Friesen says costly corn can make ethanol production tight, but he says plants need to stay online for more than just farmers.

“Ethanol plants are trying to, I think, maintain their full production because the distillers grains are in big demand,” he says.

Cattle producers driven to feed alternatives like baled corn stalks because of the drought need by-products like distillers grains

“Those bales have to be fed with distillers grains, otherwise those bales don’t have enough nutrients to feed the livestock,” says Friesen. “They are very dependent on getting distillers grains now, so if an ethanol plant shuts down it really makes that market pretty tight.”

E15 is approved by the EPA to be used in 2001 and newer cars and light-duty trucks, but the product is only being offered at a handful of gas stations across the state.

Nebraska ethanol and ag leaders believe E15 is key in getting idle ethanol plants back to producing.

Robert White, the director of market development for the Renewable Fuels Association, tells fuelretailers that gasoline demand dropped 6 percent last year as more drivers are filling up with blended fuels.

“Adding more ethanol blends like E15 can add a profit margin and can add overall volume and ultimately add to their bottom line,” says White. “A lot of times, unfortunately, the rhetoric from the major petroleum companies is a different story.”

The Nebraska Ethanol Board says getting more gas stations to offer a higher blend like E15 isn’t easy.

“There’s a terrific opportunity to use more biofuels including ethanol in the U.S., but it’s got to be done through the current distribution system which is controlled in large part by the refining and petroleum industry,” says Ethanol Board Administrator Todd Sneller.

E15 has been met with opposition from auto groups like AAA who say tests show that the higher blend can damage vehicles.

White argues that those tests were done with cars that had existing fuel problems.

“It shouldn’t be a surprise to anyone that these products failed on E15 because they also failed on E-zero which is clear gasoline without ethanol,” he says.

Nebraska ethanol believes that people will drive demand up as E15 becomes more available at gas stations.

“Once that product is understood as being new and better and different, oftentimes consumers will respond favorably and more of that product will be demanded,” says Sneller.

That consumer want is what officials believe will put plants back online.

“There’s no doubt that if E15 was as common as E10 today, then more plants wouldn’t have to shutter,” says White. “We’re seeing about 16 percent of the overall ethanol industry close at this point, we’re confident though they’ll all reopen. They might have a different name out front next year, but we’re confident they will reopen.”