Ethanol's Recovery Readout

by Lisa Gibson (Ethanol Producer Magazine) A survey of ethanol plant CEOs and general managers shows the COVID-19 downturn had a significant impact on their operations. Most producers have substantially ramped up production since spring, but a full recovery is expected to take many months.

About 84% of CEOs and general managers who took the survey said they only had to layoff or furlough 1% to 5% of employees. Approximately 10% of respondents said they laid off or furloughed more than 25% of their staff. About 3% reported 6% to 10%, mirroring the 11% to 15% range. No respondents said they laid off or furloughed 16% to 25% of their staff.

Morale has been affected, too. More than one-fifth of respondents said employee morale has been affected somewhat seriously; 47% reported moderate effects; 30% said morale has not been affected at all. Thankfully, no respondents reported severe blows to morale during the pandemic.

About 88% of respondents said no employees have voluntarily resigned over dissatisfaction during the pandemic, while about 12% said they have had voluntary resignations as a result of dissatisfaction.

The resignations included operators, supervisors, receptionists and accountants. All respondents reporting voluntary resignations said they will replace those employees, though some must wait until the plants resume production. About 76% of respondents said they have not frozen hiring, while 24% said they have.

Similarly, about 62% said they have not suspended pay raises or bonuses. Nineteen percent said they have not decided whether to suspend raises and bonuses; less than 10% said raises and bonuses have been suspended; 2% said bonuses have been suspended; and 7% said raises have been suspended.

Recovery and the Future
The majority of survey respondents 76% reported that fuel market stability and recovery are their main concerns in terms of maintaining normal operations during the pandemic. None said their main concern is coproduct market stability; and 19% said their main concern is personnel health. It is reasonable to assume all respondents have similar concerns about employee health during the pandemic, but simply do not view it as a primary operational threat. Write-in responses included staffing concerns, the political climate, the upcoming election, and U.S. EPA’s lack of cooperation.

Recovery seems to be a ways out, according to most respondents. Nearly half of the producers that responded expect it will take more than a year for the ethanol industry to recover. Twenty-nine percent expect full recovery in six to 12 months; 14% in three to six months; about 5% said one to three months; and another 5% said the industry is already recovered, which doesn’t square with the industry’s collective production rate—still 10% below last year—and is presumably a reflection of their own experience.

An astonishing 93% said they are evaluating or investing in new product technologies to enhance operational efficiency. They include high-end alcohol, cogeneration, high-protein coproducts, wind and solar technologies, additives, energy efficiency gains, fiber separation, distillation, centrifuges and carbon reduction.

Respondents are largely dissatisfied with the current administration, saying President Donald Trump has been too pro-oil, has not matched actions with promises, and has given far too many breaks to big oil. One respondent said, “Current administration rhetoric, does not match their actions. No reason to think that will improve if they have another four years and no reelection pressure.” Another wrote, “We need an administration that is going to follow the law and not cave to the oil industry.”

One respondent did say Trump’s support is critical to the ethanol industry. A few others said neither party is friendly to corn or ethanol, and one said politics drive too much.

As for trade, respondents expressed severe concern about China, citing the vitality of exports for U.S. ethanol. “If we don't get international markets opened up it will severely impact American agriculture,” one said. Another responded, “I do not think China was ever realistically going to be a viable source for ethanol exports. There will always be some global market for DDGS.”

Other countries raising trade concerns include Brazil, Canada and Mexico. A few said they have concerns with EU markets, as well.

Moving forward, small refinery exemptions (SREs) prompt intense concern, reported many respondents. Of 29 responses to the question of other policy concerns, 12 centered on SREs. Other responses included trade policy, additional demand loss, E15 or E30 growth, guidelines for USP-grade ethanol, and oil prices.

One respondent likely summed up the mentality of many producers, when they said, “I am concerned about all things these days. Seems like head wind on everything we do.” READ MORE