(Radio Iowa) — A northwest Iowa ethanol plant suspended production this week “until further notice.” Plymouth Energy in Merrill is one of at least 10 ethanol plants in the country to temporarily shut down. Three others have closed. Monte Shaw is executive director of the Iowa Renewable Fuels Association. “A lot of the experts say we’ve got about a 10% overage of production and until that production comes off line, the economics aren’t going to improve,” Shaw says.
Shaw says this supply-demand imbalance is caused by waivers federal officials are granting big oil companies — so refiners don’t have to blend as much ethanol into gasoline. “If you look at the demand destruction from these waivers that the Trump Administration has done, for the first time in 21 years, in 2018 the U.S. used less ethanol than the prior year,” Shaw says. “In other words, for 20 straight years we always used more ethanol each and every year than we did the year before here domestically, not talking exports. In 2018, we actually took a step backwards.”
Shaw says the past 18 months have been a very rough on the industry. “A certain portion of the industry has made a little bit of money, barely; some have been just struggling to break even and then there’s a portion of our industry which has been losing real money on a cash basis and you can only do that for so long. Eventually your cash reserves run out and you can’t buy corn and so we did see that come home to roost, even in Iowa.”
The board of Plymouth Energy issued a statement, saying all existing corn contracts will be honored and they hope to resume production “in the not too distant future.” A coalition of groups representing ag and biofuels interests today (Wednesday) asked a federal court to allow a 2018 lawsuit challenging the E-P-A’s management of renewable fuels policy to proceed. Shaw says if E-P-A policy doesn’t change over the next few months, more ethanol plant managers may consider temporarily shutting down production. “This is not good for our economy,” Shaw says. “This is not good for corn prices and things like that, but it’s really tough on the employees whose jobs are in question right now.”
Shaw says if the E-P-A were to adhere to the rules outlined by the Renewable Fuels Standard, there would be an “immediate impact” on corn prices and ethanol production would quickly rebound.
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