Biofuels not on a level playing field – Ethanol and biofuel reactions to USDA’s $19B coronavirus farmer relief package

April 19, 2020 |

What about rural America and biofuels? Where are we? What needs to be done?

At a Zoom online press conference on Thursday, Focus on Rural America’s Co-founder and former Iowa Lt. Governor and Secretary of Agriculture, Patty Judge, painted a not very pretty picture. Noting that prior to the coronavirus outbreak, farm income was down by half compared to last year because of the trade disruption in 2018, 44% of growers struggled to cover costs, 30 biofuel plants idle or closed in 2019, things were already hard for farmers and biofuel producers.

“We are facing tough, tough times,” said Judge. “If the President is personally talking with oil executives at The White House to negotiate their bailouts, he should be doing it for biofuels, healthcare, labor groups. He can’t bailout oil but not other impacted industries. Biofuels need to be at the table and need to be included.”

National Farmers Union President Rob Larew said, “Spring is normally a very optimistic time for farmers but this is no ordinary spring. Farmers are financially stretched to the brink across all commodities and livestock and have been over the past few years.” Just as an example, he noted that Wisconsin already has a 30% drop in already low prices of dairy in the state and independent ranchers are seeing 20-30% drops in value of their livestock. And in terms of ethanol specifically, the plant closures are having a huge impact on communities when those jobs are lost as they typically are well paying jobs, according to Larew.

On a positive note, Larew said, “There is an abundance of food supply, food is available, and the disruptions in the supply chain should be worked out in short order. We are trying to connect surplus of food with those most in need in hunger communities.”

Emily Skor, Growth Energy’s CEO was also on the press conference and said that “2019 was one of toughest economic years for ethanol producers because of floods and oil and refinery exemptions coming out of this EPA. Compound it with fuel demand down 46%, which is not surprising given the situation right now, but the impact of that is ethanol demand is down too.” Skor noted last week’s numbers showed it was down 43% with 8.7 billion galloon production annualized, half of the ethanol industry is down, ethanol stocks are at a record high at around 1 billion gallons in stock.

What about the 30 ethanol plant closures? Those numbers include only those that are public, but it’s only a fraction of those that have shut down, said Skor. And those that are operating, “are losing about 37 cents per gallon, trying to maintain contracts, keep paying their workforce, help with hand sanitizer, but we need strong government leadership and support and we need USDA right there along with us.” One way to help support ethanol is by the “lifting of regulatory burdens that limit higher blends of ethanol,” said Skor.

Former USDA Secretary Tom Vilsack reiterated that in 2019, “We saw the impact of the trade war with China and DDGs produced by ethanol not easily exported to China any more, the waivers for oil refiners. So we entered this coronavirus already seeking help and assistance.”

Vilsack offered 3 things that would help the situation:

  1. Federal government needs to continue its purchasing power and renewable fuels needs to be part of that – federal government needs to increase the purchasing of biofuels.
  2. China trade promises of additional DDGS would help.
  3. We need to look for creative ways to provide assistance to ethanol industry, something that maybe hadn’t been thought of before. Thinking outside of the box.

He gave an example from his days as USDA Secretary when they faced restrictions in the cotton industry and created a program to help cotton gin operations. The program enabled cotton growers to not have that expense of the processing of the cotton and provided several hundred million dollars to help with that. “There is no reason why this administration can’t create a similar program for ethanol to reduce costs of processing etc,” said Vilsack.

Like Judge, he too was concerned that the oil industry has the opportunity to have direct conversations and meetings with President Trump and he hopes that biofuels and agriculture has those opportunities soon too.

Continue reading on the next page to find out about the SBA loans and PPP for ethanol and biofuels producers, and more.

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