U.S. Ethanol Industry Nearing Breaking Point: Green Plains CEO

by Jarrett Renshaw, Stephanie Kelly (Reuters) The U.S. ethanol industry is about to break under the weight of the Trump Administration’s trade war with China and the surge in the number of small refineries exempted from the nation’s biofuel laws, said Todd Becker, CEO of Green Plains (GPRE.O).

The U.S. ethanol industry was preparing for growth in recent years, but the momentum has stalled in the face of President Donald Trump’s trade war with China, a major buyer, and his administration’s decision to align itself with the oil industry on demand-cutting waivers from biofuel laws, Becker said.

The sustained downturn in margins will finally begin taking its toll as some producers run out of money and begin a host of austerity measures to weather the storm.

Becker said the industry has been undisciplined, continuing to ramp up production in the face of weak demand growth and growing supplies.

Ethanol traders expect companies to start announcing output cuts soon. Plymouth Energy, based in Merrill, Iowa, said in a statement last week it decided to suspend production until further notice because of the weak margin environment.

One trader said production needs to fall by about 10% or demand needs to increase by the same amount to help steady the market.

Since Trump took office, the Environmental Protection Agency has more than quadrupled the number of waivers it has granted, saving the oil industry hundreds of millions of dollars but enraging another key constituency - corn growers - who claim the move threatens demand for one of their staple products.

“The SREs (Small Refinery Exemptions) are a political football for the president, and he’s going to have to take a look at how it’s affecting agriculture and farmers,” said Mark Marquis, CEO of privately-held Marquis Energy, which operates ethanol plants in Illinois and Wisconsin. “I can’t say I’m happy with the way the administration has handled implementing the RFS.”

While Marquis supports Trump and intends to vote for him in the next election, he said the increase in SREs granted is “troubling.” READ MORE

Excerpt from Journal Star: Last month, I applauded President Trump’s approval of E15, a 15% blend of ethanol in gasoline, for year-round sales. As a member of the Senate Agriculture Committee, I have pressed the U.S. Environmental Protection Agency (EPA) to implement E15 as soon as possible.

For Illinois, approval of E15 could boost 14 ethanol facilities and 20,000 downstate jobs. For motorists, E15 could save up to 10 cents per gallon. And for farmers, E15 could help financially when our third largest ethanol customer, China, has stopped buying our soybeans and pork in response to the President’s trade strategy.

And while President Trump has claimed that he “fought very hard for ethanol,” when you pull back the curtain, what you uncover is that the President’s EPA has issued a whopping 54 secret waivers that allow oil refineries to stop blending biofuels into gasoline. This decreases demand for E15, all to help out the big oil industry that has fought against renewable fuels.

These small refinery waivers that President Trump is issuing aren’t because of “brief economic hardship.” Big oil is doing just fine. In May, the Department of Energy reported net income for top U.S. oil companies like Exxon and Chevron has totaled $28 billion, the most profitable in five years.

Congressional frustration on this topic is bipartisan and growing. EPA argues the waivers are required by the courts, but new evidence proves otherwise. That led to my colleague, Sen. Chuck Grassley, Republican of Iowa and a longtime biofuels champion, to declare these EPA claims “a lie.”

Ethanol margins are at the lowest in history, forcing plants to idle or close, with 600 million gallons of production taken offline. In April, Marquis Ethanol canceled construction of a new $500 million facility in Scott County. And in June, Center Ethanol shut down its plant in Sauget, Illinois.