Governors' Biofuels Coalition

A brutal Midwest winter combined with a couple of other factors is making life tougher on some ethanol producers.

The cold, snowy winter in the upper Midwest has snarled railroad transportation, backing up and delaying deliveries of grain to ethanol plants and delivery of ethanol to refineries, especially on the East Coast.

Add tanker cars being diverted to transport oil and an increase in ethanol exports, and it’s reducing ethanol supplies and raising prices.

The Energy Information Administration reported last week that ethanol stocks fell to the lowest level of the year, 15.9 million barrels. Ethanol production also hit its lowest level in two months.

That has led to a surge in ethanol futures prices, up 40 percent in less than two months. Ethanol for April delivery closed on CME Globex trading Monday at $2.445 a gallon, up less than a cent.

Nebraska ethanol producers are seeing some effects. Todd Sneller, administrator for the Nebraska Ethanol Board, said rail transportation was one of the key issues discussed earlier this month at the governor’s agricultural conference in Kearney.

Sneller said said he talked to ethanol producers, grain elevators — even trucking companies — that all said they were being affected by the rail transportation troubles. “It’s become a big issue,” he said.

Two of the larger ethanol companies operating in Nebraska, however, say they’ve seen few issues.

Valero Energy spokesman Bill Day said the company, which owns an ethanol plant in Albion, has seen delays “from time to time” throughout the winter. “But nothing major — all very temporary,” Day said.

Jim Stark, vice president of investor and media relations for Omaha-based Green Plains Renewable Energy, said that other than a few slowdowns at some of its 12 ethanol plants, the company has not been affected by the rail issues. “We seem to be doing OK at this point,” he said.

Green Plains benefited from some fortuitous timing. Stark said the company had been leasing out about 400 of its rail tanker cars to oil companies operating in North Dakota. Those leases expired at the end of 2013, and Green Plains decided to put the cars back into its own fleet.

Rail tanker cars being diverted to North Dakota to transport oil from the Bakken shale has added to the weather woes.

“When rail cars weren’t stuck in snow drifts or moving cautiously over frozen tracks, (they) were being diverted for purposes of carrying more crude oil from fracking,” Christina Martin, executive vice president of the Renewable Fuels Association, said last week.

Any possible effect on gas prices remains to be seen. Nationally, AAA says wholesale ethanol prices have topped $3.50 a gallon in many markets, which has put “upward pressure” on gas prices, since more than 90 percent of the gas sold in the U.S. is 10 percent ethanol.

Locally, according to AAA’s Fuel Gauge Report, gas prices have actually dropped 4 cents in the past week, after rising nearly 20 cents in the past month.

Sneller said ethanol continues to be considerably cheaper in Nebraska than gasoline — about 50 cents a gallon cheaper — although that spread has narrowed more than 40 cents since the beginning of the year.