OMAHA (DTN) -- With demand for ethanol falling in this a second round of COVID-19 economic shutdowns, industry officials sounded the alarm bells on Wednesday about a potential stimulus package from Congress not providing specific relief for ethanol.
Congress is considering a package that includes $12 billion to $13 billion for agriculture, without including ethanol.
This comes at what is arguably the worst year for the ethanol industry, which experienced huge losses from March to November as a result of COVID-19.
Erik Huschitt, general manager and director at Badger State Ethanol in Monroe, Wisconsin, said like most ethanol producers his company has invested in technology to make his 85-million-gallon plant efficient.
But production efficiencies go only so far in keeping plants open in tough economic times.
"Even with all of those investments with doing everything that you knew you needed to do to be competitive going forward," he said during a press call, "every day you bring in corn in this environment is the day you know you're gonna put it through the plant to lose money, and you know that's the definition of non-sustainability. So, we need to right this ship and we're not going to be able to do it in the midst of a pandemic."
Scott Richman, chief economist for the Renewable Fuels Association, said revenue lost by the industry from production cuts and shutdowns will not be recovered.
"The bottom line from our analysis is that production was reduced by 2 billion gallons from March through November," he said during a press call.
"And the industry lost $3.8 billion in revenues, and I say lost because these are revenues that are permanently gone. And on the agriculture side that equates to 700 million bushels of corn that were not ground. And that's just from March through November."
Ethanol industry losses came from lower volumes sold and lower prices, Richman said.
There were weeks during April where consumption was down by 45% to 50% from year-ago levels, he said, and conditions did improve after that.
"But then they stalled out about the Fourth of July, and throughout the summer, we were bumping along and about 10% below year-ago levels were below three-year average levels, and we really never got to normal," Richman said.
"In November, as COVID cases rose and restrictions started being re-imposed," he said, "we were starting to approach more like 15% (lower production). Looking forward, we're very hopeful about the vaccines they're being approved, and that are now being distributed. But realistically, they probably will not help ethanol volumes return to near normal levels to late spring at the earliest. "In November, as COVID cases rose and restrictions started being re-imposed," he said, "we were starting to approach more like 15% (lower production). Looking forward, we're very hopeful about the vaccines, they're being approved, and that are now being distributed. But realistically, they probably will not help ethanol volumes return to near normal levels to late spring at the earliest. So, the impact the economic impact in the industry is continuing."
RFA President and Chief Executive Officer Geoff Cooper said the industry has been unable to convince USDA to use funds from the Commodity Credit Corp. to help ethanol producers.
However, he said if Tom Vilsack is confirmed as the next secretary of agriculture USDA could change direction on using CCC funds for ethanol relief.
"If the goal is to shore up some of that lost revenue, the most straightforward way of doing that is going direct to the ethanol producer," Cooper said.
"As I said there's been resistance and hesitancy to do that on the part of the current USDA leadership. But we know from years past when, when Mr. Vilsack was secretary, the last time around that his view on the CCC was more inclusive, more expansive, and in our view, more consistent with the charter of the Commodity Credit Corporation, and that you know that resource can and should be used."
Cooper said USDA under Vilsack during the Obama administration used CCC funding to support the first biofuels infrastructure grant program, for example.
"They can certainly use it to provide that same sort of direct assistance to the producers of ethanol and we've shared those views and analyses with the current USDA and administration, and we will be sharing that with the incoming administration as well."
While an aid bill might not directly carve out funds for ethanol producers, the bill is expected to have $325 billion in aid for small businesses, including $275 billion for the Small Business Administration's Payment Protection Program (PPP).
Jeanne McCaherty, chief executive officer of Guardian Energy Management in Prior Lake, Minnesota, said her company manages three ethanol plants that benefitted from the PPP loan and grant program included in a previous COVID-19 stimulus package.
"So COVID has had a major impact on our operations, and we saw throughout the industry major impact from the pandemic," she said.
Guardian idled two of its largest plants during the economic downturn and dialed back production at its third plant.
"We did apply for and receive the PPP grant, which was very, very helpful and allowed us to keep all of our employees throughout this time even when our plants were idle," McCaherty said.
"And this is really critical for our industry because employees are really the heart of our operations. They come with special skills and they help us to operate efficiently year after year after year. That was really critical that we kept employees on staff."
The U.S. ethanol industry took another hit this week, as Brazil implemented a 20% tariff on ethanol imports after negotiations between U.S. officials and Brazil were unsuccessful. Since May, U.S. exports to Brazil fell to less than 4 million gallons. Conversely, Brazil has exported about 96 million gallons of fuel ethanol to the U.S. Several groups described Brazil's move as "devastating" for U.S. biofuels, noting Brazilian ethanol producers have unfettered access to the U.S. market.
Todd Neeley can be reached at email@example.com
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