U.S. ethanol output reaches record low as plants continue to idle

Source: Amanda Peterka, E&E reporter • Posted: Monday, October 22, 2012

Ethanol production hit a record low in September, with the industry producing just 983.9 million gallons, according to information released yesterday by U.S. EPA.

That level is the first time monthly production has dipped below 1 billion gallons since at least July 2010, the earliest month for which data are available under EPA’s biofuel tracking system. The slide in production comes after corn prices skyrocketed in response to the drought, causing several ethanol facilities to idle.

“What we are seeing is a reflection of the downturn in production,” said Geoff Cooper, vice president for research and analysis at the Renewable Fuels Association. “Really, the ethanol industry has ratcheted down beginning in July, and we continue to operate at a rate that is far below where we were running in June, and certainly the beginning part of the year.”

Currently, 25 ethanol facilities responsible for 1.37 billion gallons’ worth of capacity are idled, according to data from the Renewable Fuels Association. Seven of those facilities have been shut down since June.

U.S. ethanol production continued its downward trend last week, averaging 797,000 barrels a day, down 3,000 barrels per day from the previous week, according to weekly information released by the Energy Information Administration.

Ethanol exports have also recently hit record lows. In August, U.S. producers exported just 50.2 million gallons, a 21 percent drop from July and the lowest level in 22 months, according to EIA information released last week.

Cooper said that despite the downturn, the industry is still on track to come in at the levels required by the renewable fuel standard, which sets production targets for each year. EPA allows refiners to meet those targets through either the purchase of domestic gallons of biofuel, the purchase of imported gallons or the buying and selling of fuel credits.

Critics of the ethanol industry, including livestock interests, have this year requested that EPA waive its 13.2-billion-gallon corn ethanol requirement for up to a year because of the rise in corn prices induced by the drought.

Ethanol supporters have argued that the lower production numbers show that the market is adjusting itself to the drought and higher prices. With the downturn in production in the United States, refiners, for example, are turning toward imports of advanced biofuel from places like Brazil, Cooper said.

Ethanol imports averaged 122,000 barrels per day last week, their highest level since at least June 2010, when EIA began recording information.

“We’re absolutely seeing strong imports right now, and exports have really ratcheted down,” Cooper said. “I think that’s just another reflection of this marketplace is responding to pricing signals and what’s happening with the feedstock market.”