Dozens of Ethanol Plants Remain Idle in Early 2021
USAgNet - 01/22/2021
The Renewable Fuels Association (RFA) recently estimated that about two dozen of the 200 ethanol plants in the U.S. are idled and another two dozen have reduced their production rates.
Additionally, Scott Richman, chief economist for the RFA, noted, "The corn market started moving higher a month ago and has spiked over the past couple of days." With the higher prices of corn and the worsening impact of the pandemic on fuel consumption, ethanol plant margins turned negative in early December, he said, and had recently started to return to break-even levels when the most recent corn price spike hit. "This latest move in the corn rally will likely have a negative impact on margins," he stated.
According to Farms.com, higher corn prices from the most recent rally and their expected negative impact on ethanol industry margins in the New Year are coming on the heels of the ethanol industry's deep downturn in 2020, Richman said. The RFA estimates that the ethanol industry had $4 billion in foregone revenues from March through November because of the coronavirus.
"The ethanol industry is quite resilient, but financial losses were substantial," he noted.
Richman said that it's a little early to know how ethanol plants are going to react to the recent spike in corn prices. Some plants try to price their corn in advance, he stated, but eventually the higher corn prices are going to work their way through the ethanol processing system and raise feedstock prices. The winter months are also a time when margins for ethanol plants are a little bit weaker because of lower fuel consumption.
The most recent statistics from the Energy Information Agency show that ethanol production increased slightly during the week ended January 8 as did ethanol stocks. Ethanol usage is still fairly weak, Richman said, as the increase in coronavirus cases continues to cause a cut back in transportation and gasoline consumption.
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