Ethanol plants in Iowa and across the Midwest are expected to sharply cut back on their production in the coming weeks. DeLayne Johnson, CEO of Quad County Corn Processors in the northwest Iowa town of Galva, says the two biggest reasons for the reductions are oversupply and the trade dispute with China.
“Tariffs are actually reducing our exports,” Johnson says, “and in addition, the small refinery exemptions EPA has given to Exxon, Shell, Mobil and others is certainly eating into the demand as well, to the tune of 2.8 billion gallons of ethanol and about 1-billion bushels of corn.”
Plymouth Energy in Merrill suspended production last week. That’s one of at least ten ethanol plants nationwide to temporarily shut down. Three others have closed. While recent exports have helped, Johnson says tariffs from two of the nation’s biggest ethanol customers are countering that.
“With the tariffs, we’re really not able to move anything into China and that’s potentially as much as a billion gallons a year,” Johnson says. “Also, Brazil, there’s a significant tariff there which they are also a very large client. So, we are really missing two of the largest markets.”
Iowa is the nation’s largest ethanol producer, making a record 4.35 billion gallons in 2018. Johnson says biofuel processors in Iowa and elsewhere will need to change up their operations in the future.
“That will be very important as we move forward for people to continue to diversify and get more value out of that kernel of corn,” Johnson says, “or look for synergies with other processing and become true biorefineries where we may be doing multiple things in one company. There’s some plants that are doing that as well.”
The margins for ethanol production in the western corn belt have fallen to a four-year seasonal low while ethanol inventories are at their highest levels in nine years.
(By Jerry Oster, WNAX, Yankton)