The beginning of 2020 looked decent for the ethanol industry. I am not going to say good, because after demand destruction from small refinery exemptions (SREs) and loss of markets during trade wars, ?good? was still off in the distance. However, after the 10th Circuit Court ruled the Environmental Protection Agency (EPA) had granted exemptions illegally in three states, it looked like the EPA was finally going to have to own up to the SREs and change its policy. This rosy outlook was only a mere 2 months ago. Then the fallout from COVID-19 came.
I talked with Iowa Senator Joni Ernst about the situation facing the ethanol industry in Iowa and across the country. Iowa leads the nation in ethanol production and has been hit extremely hard. Most recently, ADM closed one of the largest ethanol plants in the country at Cedar Rapids. The Senator has made it clear where she stands on supporting the industry. She admits that even she was feeling optimistic for ethanol only two months ago.
Enter COVID-19. The response has been to have people staying home. This has been the solution used across the country. Many people working from home and not commuting means demand for gasoline was plummeting. I saw fuel prices as low as 94 cents a gallon in Ankeny. I have not seen fuel prices that low since I started driving 25 years ago. While that can feel good for consumers at the pump, it means the oil industry is collapsing, and less fuel demand equates to less ethanol demand as well.
Senator Ernst says they are looking for ways to help. As of now, the only thing they have been able to get done is to get the excise tax on alcohol used to produce hand sanitizer temporarily removed. The Senator says it is only a small dent in the hits these plants have taken. This is evidenced by how many are still slowing or stopping production. Senator Ernst says that when Congress returns to Washington, she expects work to commence on phase four of COVID-19 relief. She hopes that there can be helpful for the biofuels industry in that package.
Just what that help will look like is still anyone?s guess. Senator Ernst says all avenues are being investigated. They are looking at options from both the United States Department of Agriculture (USDA) and the Department of Energy. USDA Secretary Sonny Perdue suggested looking at the energy provisions in the CARES Act.
The days keep flying off the calendar like a bad transition in a cartoon or movie. The weight of the COVID-19 pandemic is continuing to push on all sectors of the Ag industry, of which ethanol is only one part. Rural communities are continuing to feel the effects of these plant closures. Many of them depend on the strength of the agriculture industry to support their economies. When the Ag sector hurts, they rely more on the people whose lives are not directly impacted. However, for these small businesses, they are getting it on two fronts. Help to the agriculture industry as a whole, and the ethanol industry in particular, can go a long way to helping lessen the burden on these small towns and cities.
