New industry analysis released this week suggests darker days lie ahead for ethanol.
“The ethanol industry is going through a challenging and difficult time,” says Geoff Cooper, Renewable Fuels Association president and Chief Executive Officer.
“Gasoline demand collapsed, in response to stay-at-home orders. We’ve seen a dramatic reduction in ethanol consumption and production,” Cooper said.
Government data, as well as private estimates, indicate gasoline and ethanol usage have fallen nearly 50-percent compared to a year ago, according to Scott Richman, Renewable Fuels Association chief economist.
Renewable Fuels Association staff assessed “ongoing damages” by conducting an economic analysis. Staff built supply and demand estimates by using data from Purdue University. Richman suggests matters will continue to worsen.
“We estimate that ethanol production could fall by approximately three billion gallons in 2020, for supply and demand to balance. That’s a nearly a 20-percent cutback. That is mainly due to the lower usage and high resulting inventory. It’s estimated that ethanol prices will be 56-cents per gallon lower on average, from March to December. As a result, ethanol sales are on track to fall to 12.5-billion-dollars in 2020, a 46-percent reduction from the expected 23-billion,” Richman said.
“This sobering new analysis underscores the magnitude of the economic devastation being suffered in the ethanol industry,” says Cooper.
“In the last six weeks, we?ve seen the industry go from an annualized production rate of 16.5 billion gallons to 8.7 billion gallons. Roughly half of the industry?s production capacity is offline,” Cooper said.
The Renewable Fuels Association applauds the U.S. Department of Agriculture for providing assistance to farmers and ranchers in the Coronavirus Food Assistance Program (CFAP), but cannot understand ‘why’ U.S. ethanol producers were excluded.
