For ethanol producers, drought is tough for business
Sure, there’s been some snow this winter, but enough to cut the drought deficit in the Upper Midwest? Nope. And, the drought has cut into the corn supply, too, resulting in constrictions for the ethanol industry, constrictions of a very serious nature.
This winter, ethanol producers are seeing last year’s corn crop, devastated by widespread drought conditions, dwindling to the point where decisions are being made about keeping many plants open. The Associated Press (AP) reports that 20 of the nation’s 211 ethanol plants have shuttered in the past 12 months, including January of this year.
The AP said that leaves plants in 28 states still functioning and producing 13 billion gallons annually, up quite sharply from the 2.1 billion gallons produced nationwide in 2002. The report said about 10 percent of all gasoline used domestically contains ethanol or other biofuels.
What matters in these droughty times is this: Some 40 percent of the corn crop is used to produce ethanol (about 95 percent of U.S. ethanol is made from corn) and producers are trying to keep up with the Renewable Fuels Standard (RFS), which means full-tilt production. But some experts believe at least some of the crop can be diverted back into food production. They said any immediate cut-backs in ethanol corn use would have little impact on consumers, that a surplus has developed due to more fuel-efficient cars and fewer miles being driven because of the lingering effects of the Great Recession.
The AP quoted Chris Hurt, an economist at Purdue University, as saying, “There needs to be a trifecta of good news – the drought ending, a good corn crop this season and lower corn prices – before ethanol production gets back on its feet.”
That’s a pretty tall order, but Hurt believes the industry “touched bottom” in the last quarter.
The trouble is the long-term effects of drought. Farmers thought they had a record corn crop growing in 2012, but as the drought tightened its grip, those predictions went out the window and supplies got tighter while prices kept rising. This created a tough scenario for efficient ethanol production nationwide.
The fact is, even though more acres were planted to corn in 2012 than in 2011, 13 percent less corn was harvested, the AP reported. Note: The 770,000 gallons per day produced by ethanol plants in the last full week of January were the fewest produced since the U.S. Energy Information Administration began tracking weekly data in June of 2010.
Of the 20 plants that ceased production in the past year, one was in Minnesota, six were in Nebraska, two in Indiana, and 10 states have seen at least one plant close. The AP said Geoff Cooper, vice president for research and analysis for the Renewable Fuels Association (RFA) noted that about 1,000 workers were employed by the closing plants, but he didn’t know how many were laid off.
With the impact of the drought continuing as we move toward the 2013 planting season, there is sure to be continuing stress on the corn supply, both for ethanol’s needs and for the nation’s tummies — not to mention grain available for export.
I’ll see ya.
An Iowa native, Peter Graham has been a rural newspaper editor for 40 years. He currently edits a twice-weekly paper in Western Iowa. You can contact him at (712) 642-2791 or news@missourivalley times.com.