U.S. ethanol plants to cut capacity due to lower demand

Ethanol producers in the United States are cutting production by two billion gallons (annualized) due to a sharp decline in fuel consumption and trade restrictions, according to the Renewable Fuels Association (RFA).

Why is that a big deal? Roughly 40 percent of the corn crop in the United States is refined into ethanol. That is a very big deal.

It’s not just ethanol
prices and production have hit the skids, oil prices are down significantly due to the spread of the coronavirus.

However, ethanol producers are losing about 25 cents a gallon, the chief economist at RFA stated. With that decline, ethanol prices fell below $1 per gallon.

This decline in prices comes as farmers around the county are looking at the 2020-growing season. To plant corn or soybeans, or another crop is the question facing many growers.

As businesses around Kasson, Mantorville, Dodge Center, Hayfield, West Concord, Claremont and Byron struggle to remain viable with state and federal governments demanding that folks stay at home, demand for fuel will continue in free-fall.

Dodge County’s Al-Corn Clean Fuel plant in Claremont is likely to take a hit as demand forces production cuts. That’s another hit to the county’s already stressed economy.

Most U.S. fuel ethanol production capacity is located in the

Midwest region. Total nameplate capacity in the Midwest totaled 15.5 billion gallons per year
(1.0 million barrels per day) at the beginning of 2019, an increase of almost 3 percent—more than 400 million gallons per year—between January 2018 and January 2019. During the same period, combined fuel ethanol production capacity in the East Coast and Gulf Coast regions decreased by more than 100 million gallons per year.

Minnesota farmers are fourth in fuel ethanol production capacity (2019) just behind Iowa, Nebraska and Illinois, according to the United States Energy Information Administration.

It seems to me that if American drivers continue to stay off the highways in the coming summer months when most families take vacations, it will drive the prices of corn and ethanol down even further.

So, what’s the solution?

I’m not farmer, and certainly
not in the position to offer advice. However, checking with the University of Minnesota Extension, U.S. Department of Agriculture and re- viewing historical records of what was once farmed in this county might have a few answers.

When I was discussing this with Karen Jorgensen, DCI editor, she discovered that in the 1920s Dodge County farmers were growing wheat, flax and barley. Hmmm!

She popped into my office Monday morning and said some ethanol plants are switching to making hand sanitizer.

I wish all of the farmers, ethanol plant workers and those who rely on the ethanol industry well in the days and months ahead.