Ethanol Production Takes a Hit During Pandemic

Corn and other crop prices are at multiyear highs right now from exports, but ethanol production has declined as people work from home and leave their cars parked in their driveways.

“When ethanol demand fell, that pushed corn prices down,” said American Farm Bureau Federation chief economist Dr. John Newton during the virtual 57th Annual Crop Insurance and Reinsurance Bureau Annual Meeting. “The cash corn price around the country fell, and we still haven’t seen the ethanol industry recover. We’re 2 billion gallons less in terms of ethanol production compared to prior year levels. That’s about 600 to 700 million bushels of corn that weren’t used for ethanol production.”

According to the National Corn Growers Association, roughly 30% of field corn is used for ethanol, making it the second-largest market for U.S. corn.

“The renewable fuels standard requires blenders to blend up to 10% ethanol in our nation’s gas supply,” said Robert Harper, grain division manager for Virginia Farm Bureau Federation. “That’s been a big boost in the last 15 years for corn production.”

Most corn for ethanol is grown in the Corn Belt, but Virginia growers could be impacted if ethanol demand remains low. Virginia is a corn-deficit state, Harper explained, and a lot of corn is shipped in by rail from states like Indiana and Ohio. If the price of corn is lower in those states, it will impact Virginia corn prices.

“The corn comes into Virginia cheaper, so that means the people who feed corn in Virginia, when they buy corn from Virginia growers, they’ll pay less for it,” Harper said. This means less money in the farmer’s pocket.

But growers are optimistic about more people traveling as stay-at-home restrictions loosen. Gas prices also are on the rise, which can boost ethanol production.

“I would say that might be a saving grace for us,” said Hanover County farmer Grayson Kirby of Creamfield Farms, who raises corn, soybeans and other crops throughout Virginia. “As much as it hurts to have higher gas, it might help. They’ll start supplementing the gas with ethanol to help with their profit margin.”

Dustin Madison, production manager for Hanover County-based Engel Family Farms, on which corn, soybeans and other crops are grown in more than 14 counties, agreed.

“A month ago, I was buying gas for $2.05, and now I’m buying gas for $2.75,” Madison said. “At some point that’s going to spur some ethanol production. When gas goes up, ethanol production typically jumps.”

He added that combined with rebounding prices, people traveling more and the Biden administration emphasizing ethanol production, corn is looking good to growers.

“The administration said they were going to push ethanol production higher,” Madison explained. “That’s kind of where we’re headed. I think corn is going to be a lot more attractive going into the spring.”

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