Huge Losses For Ethanol Industry
The fallout from COVID-19 is almost beyond comprehension. The ethanol industry has been hit hard and that has affected every farmer that grows corn. The USDA had projected ethanol plants in the U.S. would grind over 5 billion bushels of corn this marketing year. That is around 35 to 40 percent of the entire corn crop in the U.S.
It all began when gasoline and ethanol demand dropped when countries all over the world began telling people to stay home. Then a crude oil war began between OPEC countries and Russia over market share. Neither would cut crude oil production. Instead they increased production to force the other out of business. Crude oil prices dropped from around $55 a barrel to about $20.
Ethanol prices also dropped about 35 to 40 percent which has resulted in huge losses for ethanol plants. Every ethanol plant will have a different cost structure. I read one article last week that on average ethanol plants were seeing a loss of $.70 cents a bushel. The result, some ethanol plants are no longer buying corn and will be shutting down.