COVID-19 crisis affects ethanol industry
Shaw: Producers will need help
As COVID-19 spread across the United States, the Centers for Disease Control and Prevention urged Americans to stay home and practice social distancing to slow the spread of the virus. Schools closed and adults started working from home, if they could.
Eventually, some states, counties and cities began issuing stay-at-home orders, and even those that didn’t issue orders still encouraged their residents to stay home.
With fewer cars on the roads, fewer people commuting to work and fewer families traveling for vacations, gasoline prices across the nation began to drop. And while consumers at the pump are enjoying the lowest gas prices in a decade, the nation’s ethanol biofuels industry is hurting.
“Ethanol is in nearly every gallon of gasoline,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association. “And what we’ve done to help mitigate the spread of the virus is we’ve shut down the economy to a large extent, we’ve told people to work from home, we’ve told people not to go out and as a result, gasoline demand is down tremendously.”
And while Shaw highlighted that the ethanol industry is not the only industry suffering during this COVID-19 crisis, nor is it suffering worse than any other industry, nearly half of the ethanol production capacity is now offline, both in Iowa and across the country. He said he is aware of eight or nine ethanol processing plants in Iowa that have shut down production over the past month, but did not specify which ones.
“It’s as bad as I’ve ever seen it,” Shaw said.
Shaw said that while no specific government aid has been released for the ethanol industry, it will need help to get through this.
“Ethanol producers will need some assistance to help weather the storm, otherwise we could see some bankruptcies,” he said.
Locally, the industry’s downturn hasn’t yet impacted one of Webster County’s three ethanol processing facilities.
Cargill Fort Dodge, located west of Fort Dodge along Iowa Highway 7, has 162 employees and 98 contractors working in the facility. The plant produces dextrose, feed for cattle, corn gluten meal generally fed to poultry, corn germ and a molasses like substance called corn steep liquor in addition to ethanol.
“During the crisis, we are intently focused on protecting the health of our employees, maintaining our operation and fulfilling our important role to nourish the world,” said Alan Viaene, Cargill Fort Dodge facility manager. “We are working closely with our farmer suppliers and customers to do this, and fortunately, we have experienced minimal disruption to date.”
Viaene said that the facility has chosen to have the employees who can work from home do so. However, most of the facility’s staff aren’t able to do their jobs at home, but the company has adopted additional health and safety protocols for employees to help keep them safe and limit the risk of exposure to the coronavirus. Employees entering the facility are being screened, visitors are currently prohibited, and social distancing practices have been adopted where possible. Cargill is also following cleaning and sanitizing procedures and offering shift flexibility to help keep the facility open, Viaene said.
Although the virus outbreak’s impact on fuels hasn’t hurt Cargill Fort Dodge yet, they are monitoring the situation.
“It’s no surprise that the shelter-in-place orders to slow the spread of the virus have emptied roads, weakening the demand for fuel-grade ethanol by roughly half of what it was a year ago,” Viaene said.
And it’s not the ethanol producers who are feeling the pain of the pandemic — America’s farmers are, too.
“We’re a key market,” Shaw said. “We’re the largest market for corn in the country. Thirty to 40 percent of corn goes directly into ethanol plants for its first processing.”
If this COVID-19 pandemic continues for many more months, the farmers who are out in their fields planting right now might not have a market to sell their harvests.
“There’s a lot of frustrated farmers right now,” Shaw said. “I’m part of a family farm operation, and we deliver a lot of corn to an ethanol plant in Shenandoah, Iowa, and right now they’re not buying. I want to make sure the farmers out there who want to deliver their corn but can’t, that we totally get their frustrations.”
Surviving the crisis brought on by COVID-19 will depend on all players in the ethanol industry – farmers, producers and consumers, Shaw said.
“We’re all in this together and hopefully we can get through it quickly,” he said.
At Cargill Fort Dodge, Viaene is confident that the ethanol industry will bounce back once the crisis is over.
“Our industry is resilient, successfully having navigated through crises brought on by nature/the environment, the financial market, tariffs/trade and many other external factors in the past,” he said. “We anticipate that when stay-at-home orders are lifted, travel will pick up again and in turn, fuel consumption. We also anticipate a second wave of increased fuel consumption as the economy picks up steam, unemployment returns to normal levels and increased travel is observed.”
Valero Renewables and POET operate the other ethanol plants in Webster County. Representatives of those companies did not return calls seeking comment for this story.