Ethanol Prices Hit All-Time Low, Unconfirmed Reports of Plant Shutdowns

March 18, 2020

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by Jerry Perkins (Successful Farming) ... The downturn in demand for ethanol, which is blended at a 10% rate in almost every gallon of gasoline consumed in the U.S., is coming at a time when ethanol plants were already economically challenged by the Small Refinery Exemptions granted by the Trump administration’s EPA and by the loss of the Chinese ethanol export market because of the trade war against the Chinese being waged by the Trump administration.

Jim Burkhard, vice president and head of oil markets HIS Markit Watch, said the plunge in gasoline prices and the resulting drop in ethanol prices are setting records. “On Monday (March 16), the nearby gasoline price dropped by 21¢ per gallon, falling to 70¢ per gallon,” Burkhard wrote. “This is now at the lowest price since November 2002. Ethanol prices fell to new all-time lows on Monday, falling 16¢ per gallon to $1.03 per gallon. It is unusual to see ethanol trading at a 33¢-per- gallon premium to gasoline, rather than a 30¢ discount.”

Crush margins at ethanol plants have declined to -22.7¢ a gallon according the S&P Global Platts, the lowest level since Platts began tracking the margin in 2016. “Sinking margins have spurred speculation that some ethanol plants will have to shut down, with one source calling it 'inevitable,' ” Platts reported.

No plant closings had been announced as of the close of business Tuesday, March 17, but sources contacted by Successful Farming magazine confirmed that plants are being idled because of financial concerns.

Steve Roe, general manager of Little Sioux Corn Processors, LLP in Marcus, Iowa, said the drop in the demand for ethanol and the resulting low prices are undermining many ethanol plants’ financial strength at a time when the plants were already hurting.

Roe said he has heard of plants that have shut down or that didn’t go online after a shutdown for routine maintenance. He declined to say what plants have halted production. “We’re seriously underwater (financially) and everybody is in the same boat,” Roe stated. “We’ve had burdensome ethanol stocks hanging over our head and, with the decline in oil price, ethanol prices are down, as well. Demand also is worrisome with some people saying demand will be reduced 40%. If that is true, we’ll run out of space to store the ethanol and we’ll be forced to reduce our production rates, whether we want to or not.” READ MORE

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Feature: US ethanol market wonders what's next after US price crash (S&P Global Platts)

Potential for global recession threatens already slumping farm economy (Agri-Pulse)

Philippines fuel-grade ethanol hits record low at $407/cu m after US markets tumble (S&P Global Platts)

RFA, BIOFUELS INDUSTRY IS NERVOUS ABOUT TURMOIL IN ENERGY MARKETS (News Dakota)

Crude oil’s price collapse hits ethanol market hard (Farm and Dairy)

Ethanol prices at record low, industry in "dire straits" (RFD TV)

SIRE navigates ‘uncharted territory’ of COVID-19, falling prices (Ethanol Producer Magazine)

Coronavirus is Latest Threat to Ethanol Industry (AgNewsWire)

UPDATE 1-U.S. biofuel group says ethanol industry sharply cutting production (Reuters)

Biofuel plants brace for potential shutdowns (Agri-Pulse)

Ethanol industry seeks to protect employees during pandemic (Ethanol Producer Magazine)