Ethanol Traversing Floods and Demand Issues

Ethanol Market and Weather
A variety of gasoline options, including flex fuel, at this service station in Erie, PA (July 2018) ( Wes Mills )

The heavy flooding is causing issues for multiple industries in the Midwest including ethanol plants where more than a dozen have been idled or slowed due to the water.

Early estimates show flooding has shuttered nearly a sixth of U.S. ethanol production as plants in Nebraska, Iowa and South Dakota are forced to close or scale back production. Growth Energy is asking Transportation Secretary Elaine Chao for help expediting rail shipments of ethanol.  The flooding is threatening to push up gas prices ahead of the summer driving season.

It's all part of a bigger picture around ethanol production and demand. During a discussion with Tyne Morgan, Jim Rebhuhn of Hertz Farm Management says recent reports show ethanol demand dropped for the first time in 20 years. 

"It's certainly disappointing because it is such a big part of the overall demand," says Rebhuhn. 

He cites trade issues with China and the recent tariffs as the main reason for demand erosion.

"The interesting thing about China is that they plan to have a mandate by 2020 to move to E10," says Rebhuhn. "Their plan to do that was really centered around building ethanol plants in China."

He says the country is only on track to have one facility up and running by 2020 leaving suppliers like the U.S. primed to fill the void.

"So much of that demand I think is going to have to come from importing ethanol and why its even more important that work on these trade issues," says Rebhuhn. "If you want a really quick impact that's clearly the way to go."

Long term, Rebhuhn believes E15, once approved, could provide some additional growth to the ethanol market. 

"Hopefully by June 1 we'll have E15 approved and it will give some additional growth to the ethanol market," says Rebhuhn. "It's going to take probably through the end of the year to get many of these fueling stations converted over and into new blender pumps." 

Rebhuhn says don't expect big impacts to demand to start for at least another year or so. 

To watch the entire conversation click on the link above