Ethanol Blog

Ethanol Producers Could See Economic Losses Near $10 Billion From COVID-19

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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The ethanol industry has lost about $3.4 billion as a result of the COVID-19 economic shutdown in 2020, according to a new analysis. (Photo by Jim Patrico)

The ethanol industry in the United States has lost about $3.4 billion already in 2020 as a result of the COVID-19 economic shutdown, a new analysis from the Renewable Fuels Association said, with losses to continue to mount on into 2021.

Though ethanol margins have been improving since the last of May, https://www.dtnpf.com/…, the industry is in a bit of a holding pattern waiting to see if the U.S. economy fully reopens.

The RFA analysis said losses for the industry could deepen if states continue to open and close as a result of COVID-19 cases.

"Based on the latest projections from the (U.S.) Energy Information Administration and the Food and Agriculture Policy Research Institute, the RFA study also found that pandemic-related damages in 2020 and 2021 could reach nearly $9 billion," RFA said.

According to a news release from the RFA, the new study uses empirical data to assess effect COVID-19 has had on the ethanol industry.

The study said the "cumulative decline" in ethanol produced and consumed exceeded 1.3 billion gallons. That has led to nearly 500 million less bushels of corn used for ethanol production.

As a result of revenues from ethanol and co-products sales were reduced by more than $3.4 billion as a result of reduced output and lower prices.

"Based on EIA and FAPRI projections and assuming current market conditions do not deteriorate, total pandemic-related revenue losses for the industry could approach $7 billion in 2020 and $1.8 billion in 2021," the RFA said.

"However, if additional travel and business restrictions are adopted by states, the losses would be larger and may even surpass the $10 billion estimate from RFA's initial forward-looking analysis released in April."

In a press release RFA President and Chief Executive Officer Geoff Cooper said at one point in late April more than half of ethanol production capacity was down.

"The idling of dozens of ethanol plants reverberated throughout rural America and sent ripple impacts across the farm economy," Cooper said.

"We have seen conditions improve since the low point in April, but ethanol production and consumption remain well below pre-COVID-19 levels."

Cooper said if Congress approves another COVID-19 economic relief package it needs to include help for ethanol producers.

"As members of the Senate begin to craft their next COVID-19 stimulus package, we implore them to ensure the renewable fuels industry is not left behind again," he said.

"We ask that they stand up for the 350,000 critical and essential workers whose jobs are supported by the ethanol industry."

RFA reiterated its support for the proposed renewable fuel reimbursement program in the HEROES Act passed by the House on May 15, as well as the Renewable Fuel Feedstock Reimbursement Act of 2020, introduced in the Senate on May 19 by Sens. Chuck Grassley, R-Iowa, and Amy Klobuchar, D-Minnesota.

"Both programs would provide vital emergency relief to the nation's struggling ethanol producers and help ensure the industry is able to participate in the nationwide economic recovery from COVID-19," RFA said in a news release.

Read the study here: https://files.constantcontact.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow me on Twitter @toddneeleyDTN

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