Coronavirus to Burst Another Bubble? Carbonation Shortage Threatens Seltzer, Beer and Soda

April 20, 2020

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by Chloe Sorvino (Forbes) Soft drink and beer makers are scrambling for access to CO2, a key ingredient in the carbonization used to make their products after coronavirus shutdowns have closed off their access to the chemical. “The supply is rapidly deteriorating,” says Geoff Cooper, president of the Renewable Fuels Association, which represents the ethanol industry. “Absent of some intervention to keep these facilities running, it will further deteriorate. We’re on the verge of something fairly disruptive. It’s going to be hard to come by.”

A coalition of associations from beer and meat packers, which use it for slaughter and refrigeration, sent a letter to Vice President Mike Pence on April 7, 2020, expressing “strong concern” about the shortage and asking for government intervention as ethanol plants were forced to close in droves due to the coronavirus crisis. CO2 production at ethanol plants, which produce carbon dioxide as a byproduct from fuel production, was down about 20% at the time.

Production is now down 30%. In the past two weeks suppliers have started breaking contracts and preparing for shortages as five more ethanol plants have either closed or significantly reduced output. Of the 45 U.S. ethanol plants that sell carbon dioxide, 34 are closed, while other sources from ammonia plants and oil refineries are also declining due to the crisis.

A serious crisis will hit in May without government help, says Rich Gottwald, the CEO of the Compressed Gas Association. Within the next four weeks, he expects production to reach a more than 70% shortfall. “It continues to get worse,” Gottwald says, who adds that he is hopeful after recent discussions with the federal government. “There will be shortages. The entire food industry understands the challenge now. Everything is so interconnected.” READ MORE

Soda, Seltzer Water and Beer Threatened by CO2 Carbonation Shortage (MovieWeb)

Beer may lose its fizz as CO2 supplies go flat during pandemic (Reuters)

Coronavirus: Fears of beer shortage as carbon dioxide supplies fizzle out (Sky News)

Sorry, beer fans — the coronavirus pandemic could make your drinks flat. Here’s why (News & Observer)

Beers and other beverages may lose fizz during pandemic-fueled CO2 shortage. (Washington Post Energy 202)

Coronavirus-driven CO2 shortage threatens US food and water supply, officials say (The Guardian)

Corn Growers and Livestock Groups Hit Hard by Reduced Production of Ethanol (WHOTV; includes VIDEO)

COLUMN: Ethanol reduction causes feed issues for area cattle producers (Enid News & Eagle)

Amid pandemic, Iowa ethanol plant restarts production to help Des Moines water treatment (Des Moines Register)

Surprising Shortage Of Carbon Dioxide Threatens Food And Beverage Industries (Forbes)

Feed options dwindle for feedlots (Western Producer)

Aemetis Begins Deliveries of Carbon Dioxide Under Supply Agreement With New Messer CO2 Plant (Globe NewsWire/Aemetis)

Ethanol Plant to Provide About 450 tons of CO2 Daily for use in Food, Beverage and Other Industries; Helps Meet Market Shortage Caused by COVID-19 Crisis (Aemetis)

Ethanol, Corn, Carbon Dioxide? The Ripple Effect and Why You Might Hoard Carbonated Beverages (Sound Cloud The Business of Agriculture; includes AUDIO)

The bubbles in your beer and soda may flatten due to falling gas prices (Fox News; includes VIDEO)

As meat-processing factories struggle to reopen, govt. documents warn of shortages (Yahoo! News; includes VIDEO)

How cheaper gas could lead to meat shortages: report (PennLive)

A Coronavirus Chain Reaction: Less Driving Means Less Fizz for Sodas: Carbon-dioxide output is down, as the drop in gasoline demand slows fuel production (Wall Street Journal; includes VIDEO)

CO2 Outlook: Consequences of the Crunch (Ethanol Producer Magazine)

CO₂ market seeks its balance as the US economy starts back up (Chemical & Engineering News)

Fears ease over CO2 shortages in US, some spot shortages (Gas World)

POET: US CO2 situation returning to normal, but some “ongoing allocation” (Gas World)

There’s a shortage of carbon dioxide, but local breweries could be safe from impacts (WYDaily)

Carbon Capture and Brews: Rhode Island Brewery Puts Emissions Back into Beers (Energy News Network)

Your beer needs carbon dioxide, but the price skyrocketed over the summer (NPR)

Excerpt from The Guardian: An emerging shortage of carbon dioxide gas (CO₂) caused by the coronavirus pandemic may affect food supply chains and drinking water, a Washington state emergency planning document has revealed.

The document, a Covid-19 situation report produced by the State Emergency Operations Center (SEOC), contains a warning from the state’s office of drinking water (ODW) about difficulties in obtaining CO₂, which is essential for the process of water treatment.

The document says that the ODW is “still responding to [that day’s] notification of a national shortage of CO₂”.

It continues: “Several [water plants] had received initial notification from their vendors that their supply would be restricted to 33% of normal.”

It further warns: “So far utilities have been able to make the case that they are considered essential to critical infrastructure and have been returned to full supply. However, we want to ask if CISA [the US Cybersecurity and Infrastructure Security Agency] can assess this through their contacts, if this is sustainable given the national shortage.”

Asked to clarify the nature of this problem, ODW director Mike Means said in an email that his agency had first learned of potential problems when Seattle public utilities were “contacted by their vendor Airgas who supplied a copy of a Force Majeure notice”, warning them that their CO₂ order would be reduced due to pandemic-related shortages.

Force majeure is a contractual defense that allows parties to escape liability for contracts in the case of events – such as a pandemic – that could not be reasonably foreseen.

In this case, Means wrote, “Airgas informed in their notice that they would only be able to do 80% of their normal service but subsequent discussions said to expect more like 33%”.

At this point, he added, “we reached out to understand if this was a WA specific problem or national. We quickly understood it to be a national issue.”

...

The main reason for national shortages, according to the CEO of the Compressed Gas Association (CGA), Rich Gottwald, is a ramping down of ethanol production.

“Back in the summertime, the [Trump] administration exempted some gasoline manufacturers from using ethanol. Then we had Russia and Saudi Arabia flooding the market with cheap gasoline. All of that led to an oversupply of ethanol,” Gottwald said.

“As ethanol manufacturers were ramping down because there wasn’t a market for their product, along comes Covid-19, which meant people weren’t driving anywhere”, he added.

This led to plant closures, including among the 50 specialized plants that collect CO₂for the food and beverage market.

Gottwald’s association, along with a number of associations representing food and beverage industries, which together use 77% of food-grade CO₂, issued a joint warning to the federal government about the shortage. READ MORE

Excerpt from High Plains Journal: Food industry uses of CO2

The food and beverage industry uses about half of all industrial CO2, and is the largest user of liquid CO2, according to Bala Suresh, head of IHS Markit’s industrial gases unit. Food processors use it for frozen foods, chilling, refrigeration, inhibiting mold, acidifying sparkling beverages and beermaking.

Meatpackers use CO2 not only to chill and preserve meat, and to absorb heat from meat grinding operations, but also to stun animals before slaughter. Suresh said it was meatpackers that first reported local shortages of CO2. He said 29 of the 45 U.S. ethanol plants that sell CO2 commercially have cut production. Although there is plenty of reserve capacity, not all of it is located where it is needed. In the U.S., CO2 demand is local. It rarely travels more than 200 miles from its point of production.

According to IHS Market policy analyst Roger Bernard, meatpackers have asked the USDA to allow them to use lower grades of CO2 during the crisis. Although the USDA has issued no formal permission, he said this was tacitly being allowed.

There is also a request to allow the Commodity Credit Corporation to use its authority to prop up corn prices by subsidizing ethanol plants’ feedstock (i.e., corn) purchases. The CCC has between $7 billion and $9 billion remaining from its annual $30 billion borrowing authority for the year. The CARES Act added another $14 billion to that authority, said Bernard.

The oil industry uses most of the rest of industrial CO2 to pressurize wells. That demand, too, has decreased, mostly due to the drop in oil prices caused by a price war between Saudi Arabia and Russia. ...

For more information, listen to the IHS Market podcast at https://ihsmarkit.com/research-analysis/podcast-covid19-impacting-supply-of-co2.html READ MORE