Total economic impact to ethanol industry could reach $9 billion by end of 2021 due to pandemic.

July 16, 2020

3 Min Read
ethanol plant with corn field in the front
Jim Parkin iStock

The COVID-19 crisis has already led to more than $3.4 billion in lost revenues for the U.S. ethanol industry, according to an economic analysis released July 15 by the Renewable Fuels Assn. (RFA). Based on the latest projections from the Energy Information Administration (EIA) and the University of Missouri Food & Agricultural Policy Research Institute (FAPRI), the RFA study also found that pandemic-related damages in 2020 and 2021 could reach nearly $9 billion.

The new study by RFA chief economist Scott Richman uses empirical data to assess the actual impact of COVID-19 on the ethanol industry to date. For the period running from March through June 2020, the study found:

  • The cumulative decline in ethanol production and consumption exceeded 1.3 billion gal.

  • Nearly 500 million fewer bushels of corn were used in ethanol production during the period.

  • Industry revenues from ethanol and co-products sales were reduced by more than $3.4 billion due to the combination of reduced output and lower prices.

Based on EIA and FAPRI projections and assuming that current market conditions do not deteriorate, total pandemic-related revenue losses for the industry could approach $7 billion in 2020 and $1.8 billion in 2021. However, if states adopt additional travel and business restrictions, the losses would be larger and may even surpass the $10 billion estimate from RFA’s initial forward-looking analysis released in April.

Related:Ethanol industry needs to transform

Notably, these figures do not include additional expected losses in co-product sales revenues, which (based on co-product revenue losses to date) could amount to nearly $1 billion in further losses in 2020 and more than $250 million in 2021.

The report added that FAPRI expects the decline in consumption to be concentrated in the domestic market, whereas exports are not significantly affected relative to their March forecast. “This assumption is debatable, given the observed significant reduction in ethanol exports in April and May,” the report stated.

“At one point in late April, more than half of the ethanol industry’s production capacity was shut down,” RFA president and chief executive officer Geoff Cooper said. “The idling of dozens of ethanol plants reverberated throughout rural America and sent ripple impacts across the farm economy. We have seen conditions improve since the low point in April, but ethanol production and consumption remain well below pre-COVID-19 levels.”

Cooper said the report provides a clearer picture of the damage done to date and the challenges the industry will continue to face well into 2021. “The analysis again underscores the need for Congress to act expeditiously to deliver emergency relief to the renewable fuels industry,” he said. “As members of the Senate begin to craft their next COVID-19 stimulus package, we implore them to ensure the renewable fuels industry is not left behind again. We ask that they stand up for the 350,000 critical and essential workers whose jobs are supported by the ethanol industry.”

Related:Ethanol industry seeing signs of recovery

Cooper said RFA strongly supports the Renewable Fuel Reimbursement Program included in the HEROES Act passed by the House on May 15, as well as the Renewable Fuel Feedstock Reimbursement Act of 2020 introduced in the Senate May 19 by Sens. Chuck Grassley (R., Iowa) and Amy Klobuchar (D., Minn.). Both programs would provide vital emergency relief to the nation’s struggling ethanol producers and help ensure that the industry is able to participate in the nationwide economic recovery from COVID-19. According to RFA, either program should be included in the next comprehensive COVID-19 stimulus bill.

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