Rep. Dusty Johnson, industry leaders: Ethanol's collapse an anchor dragging down corn growers
Billions of dollars have been wiped off the balance sheets of the nation’s ethanol producers as demand for gasoline during the pandemic “cratered,” the head of the American Coalition for Ethanol said Wednesday.
Brian Jennings, the group’s CEO, predicted that pre-pandemic demand for gasoline won’t return until 2022. Until then, the industry is looking to expand into other markets and hoping to offset domestic production barriers with international trade.
But short-term the industry is hoping that a fourth coronavirus relief package being debated in Congress will provide relief. The industry, Jennings said, is in the “throes of its worst body blow ever.”
Jennings spoke with Rep. Dusty Johnson and Lisa Richardson, executive director of the South Dakota Corn Growers, at an agriculture forum at the Sioux Empire Fair. The event was moderated by the East River Electric Power Cooperative and hosted by the Touchstone Energy Cooperatives.
Congress has wrestled with passing another coronavirus relief bill due to different priorities in the versions from the Democratic-controlled House and Republican-controlled Senate, Johnson said. But both versions contain relief for the ethanol industry. The House version attempts to backfill lost revenue with direct per-gallon payments while the Senate version includes $20 billion to the United States Department of Agriculture to support the agriculture industry, including ethanol producers.
Of the two versions, Johnson said he prefers how the House deals with the ethanol industry.
“I’m a little concerned that if we don’t give USDA more direction, they’re going to mess it up,” he said of the Senate version.
Jennings and Richardson said that either version of the relief package would be fine with them. More than half the state’s corn crop is used by the ethanol industry, Richardson said, and with demand slumping, producers will be forced to carry excess corn supplies until demand returns.
World trade, she added, has also hurt growers.
“There has been a glimmer of hope: China purchased the largest piece of corn in our history, but overall the rest of the economy around the world with this COVID is affecting them and their ability to purchase the product,” Richardson said.
The year actually started on a bright note for the ethanol industry, Jennings said. The industry won a lawsuit against the Trump administration’s granting of waivers to refiners. Those waivers allowed refiners to bypass ethanol blending requirements, making for a bad 2018 and 2019 for the industry. With the win, the industry was looking forward to a rebound year.
“Then things got ugly, of course,” he said.