Lance Lillibridge has spent more than two decades in farming — he grows corn, soybeans and alfalfa — but making it another year is no guarantee.
“Survival is iffy,” the Vinton farmer said. “I’m not sure how much worse it could possibly get.”
From Lillibridge’s farm to dry mills across the state, Iowa’s ethanol industry experienced a sudden drop in demand during the pandemic, adding to an already difficult time for ethanol producers across the state.
Iowa State University’s Center for Agricultural and Rural Development anticipates the state ethanol industry to take a $2.6 billion hit by the end of 2020.
“It’s been pretty devastating,” said Monte Shaw, executive director for Iowa Renewable Fuels Association.
As drivers followed shelter-in-home orders in effect throughout the country, Shaw said that had a “direct correlation in destroying demand for fuel.”
“When that gasoline demand dropped by 50 percent, so did ethanol demand,” Shaw said.
Some facilities completely ceased production. Others, Shaw said, operate on significantly reduced capacity.
Southwest Iowa Renewable Energy, an ethanol mill in Council Bluffs, decreased production to 50 percent in mid-March before recently returning to near-full capacity.
Mike Jerke, SIRE chief executive, has been in the industry for about 20 years and said has never seen anything like this in his career.
In Cedar Rapids, Archer Daniels Midland’s ethanol plant has been closed during the pandemic without a timetable for employees to return.
“We looked at a variety of options, and in the end, we made the difficult decision in April to temporarily suspend ethanol production at our dry mills in Cedar Rapids and Columbus, Nebraska,” said Jackie Anderson, an ADM spokeswoman, in an email.
Hand sanitizer
Decreased fuel demand, coupled with a nationwide surge in demand for hand sanitizer, caused many ethanol plants to pivot to making hand sanitizer. SIRE was among the plants to make hand sanitizer during the pandemic, establishing partnerships with local restaurants.
“Our industry I think really stepped up,” Jerke said.
U.S. Sen. Chuck Grassley called the pivot to hand sanitizer “very patriotic.”
“People everywhere are using their enginuity to get things done to help us over the pandemic,” Grassley said to The Gazette during a phone interview this past Tuesday.
While noble, it was far from profitable.
“It’s a drop in the bucket compared to the fuel,” Shaw said. “Not even enough to move the decimal point.”
He said one of the larger ethanol plants in Iowa probably could produce enough hand sanitizer for the entire country.
“It takes a lot of six-ounce bottles of hand sanitizer to replace how much we drive,” Shaw said. “It’s exponentially different.”
Changes in U.S. Food and Drug Administration hand-sanitizer requirements tabled hand sanitizer production across the state on June 1. Grassley, Ernst and other Midwestern senators co-sponsored a bill in the Senate to loosen restrictions for hand-sanitizer production again.
In the meantime, Jerke is working on reconfiguring SIRE’s facility to produce the higher-standard hand sanitizer.
The FDA had changed its guidance on hand sanitizer to require ethanol producers to comply with United States Pharmacopeia or Food Chemical Codex standards. When the pandemic started, producers did not need to follow these standards.
More than just coronavirus
The pandemic makes up just a fraction of the challenges the state’s ethanol industry is facing.
“It’s kind of like we’re in the perfect storm right now,” said Lillibridge, the Vinton farmer.
Trade tensions with China and U.S. Environmental Protection Agency policy decisions under the Trump administration already created a challenging climate for ethanol producers long before the first confirmed coronavirus case in Iowa.
“Our domestic market has been undermined by EPA actions,” Shaw said. “And then the Chinese trade war, along with some other trade issues, really shut down what should’ve been our largest export market.”
Patty Judge, former Iowa lieutenant governor and founder of the Focus on Rural America group, agreed. She described the domestic and international demand collapses as a “double whammy.”
“We were experiencing challenges before this pandemic ever happened,” Judge said.
The combination of those three challenges have created what Lillibridge called a “perfect storm.”
“Right now we’re dealing with three simultaneous challenges, any one of which would make life very unpleasant,” Shaw said.
Escalating trade tensions with China resulted in a much smaller international market for Iowa ethanol producers.
While Judge said trade with China has always been “tricky” — the international market overall is a “very delicate dance” — the recent trade war made matters much worse.
With the pandemic, Grassley believes the paucity of Chinese purchases is not a lack of a “good-faith effort,” but that it doesn’t have the capability to buy ethanol as its economy faces its own coronavirus-related hurdles.
“They’re committed to buying ethanol, but I don’t think they’ve started yet,” Grassley said.
Judge said it takes a long time to re-establish enough trust for many of these international relationships after a something like the U.S.-China trade war.
“Unfortunately, that can be undone much more quickly than it can be developed,” Judge said. “And that’s kind of what happened to us.”
Lillibridge said the new trade deals with Mexico and Japan has given some relief, but that’s still a fraction of what’s needed to return to profitability.
“There are countries out there that want our product,” Lillibridge said. “And we can be competitive with those products.”
Policy creates challenges
The federal Renewable Fuel Standard, first established in 2005, has set benchmarks for renewable fuel usage through 2022. In 2020, the United States is supposed to use 15 billion gallons of biofuel.
Shaw, executive director of Iowa Renewable Fuels Association, said the EPA has “systematically worked to undermine the Renewable Fuel Standard,” though.
He estimated 4.5 billion to 5 billion gallons of biofuel demand has disappeared because of EPA policies since President Donald Trump took office.
“The current EPA — the Trump EPA — has consistently taken steps that hurt biofuels instead of helping biofuels,” Shaw said.
The allowance of 15 percent ethanol blends year-round — a measure President Barack Obama did not support — has been a silver lining, those in the industry say.
But the refinery waivers outweigh any benefits from 15 percent ethanol.
Judge echoed those sentiments, saying the EPA has been “incredibly difficult, if not horribly crippling” for Iowa ethanol under the current administration.
“We are getting no help — and in fact we’re getting crippled by — the administration and the EPA,” Judge said.
Jerke told Trump about these problems when the president toured SIRE in Council Bluffs a little more than a year ago. The ethanol plant CEO described it as a “tremendous opportunity,” with local investors explaining the problem one by one to him.
Jerke watched the EPA continue to grant waivers to refineries since then, though.
“It’s been disappointing,” Jerke said. “It defies logic from a political perspective as well.”
The EPA recently said it was considering 52 gap waivers allowing oil refineries facing financial hardship to skip blending ethanol into its fuel. These refineries are seeking renewals for waivers dating as far back as 2010.
The 10th Circuit Court of Appeals ruled in January these exemptions can only be given to companies continuously seeking them since 2010, making these gap waivers illegal.
“I don’t know how anyone keeps a straight face in doing that,” Jerke said.
Iowa politicians from both sides of the aisle sharply criticized EPA Administrator Andrew Wheeler’s actions.
“They’re trying to claim credit for things that happened in 2011, 2012, 2013, 2014,” Grassley said. “If they didn’t have economic trouble back then, how can they claim that they can get the waivers based on something 10 years (ago)?”
Grassley and other senators signed on to a letter Friday authored by Sens. Joni Ernst, R-Iowa, and Amy Klobuchar, D-Minn., urging the EPA reject petitions for small refinery exemptions for past compliance years.
Simply even considering the waivers after the 10th Circuit Court decision is “unconscionable,” Judge said. Jerke described it as “flabbergasting.”
Grassley was hesitant to criticize Wheeler’s boss, though. As long as Trump hits the 15-billion ethanol gallon mark in the Renewable Fuel Standard when the 2020 biofuel numbers come out in March 2021, Grassley will be pleased.
“The president said 15 billion gallons,” Grassley said. “As long as that’s delivered, then I’m happy.”
Grassley told administration officials, though, this will be a big issue in the election, and people are “losing confidence in the administration delivering” because of Wheeler’s actions.
Judge and Democratic Senate candidate Theresa Greenfield called for Wheeler’s resignation this past week to “give our industry a chance.” Judge is hoping Iowa’s congressional delegation follows suit.
“He needs to go, no matter what happens in November,” Judge said. “I don’t think we can wait until November.”
Grassley is confident that won’t be necessary to stop the waivers from going through, though.
“I’ve had my problems with him, but I think this 10th Circuit of Appeals kind of curbs any future harm,” Grassley said. “He’s already done some harm to the ethanol industry, but in the future, I think he is very limited in what he can do.”
If the federal government rejects the waivers, there won’t be an impact on Iowa ethanol producers.
If the waivers go through, industry experts predict at least $2 billion in lost revenue for Iowa’s ethanol industry.
“It wouldn’t be the straw that broke the camel’s back,” Shaw said. “It’d be the anvil that broke the camel’s back.”
Judge said the viability of the industry’s survival would be “really questionable” if those 52 waivers are approved.
Weeks, months or years?
Experts are seeing a gradual rebound in demand for ethanol as some drivers get back on the road.
“As we seem now to be picking up on our driving — at least some people are — they are starting to rebound,” Judge said. “The situation looks better now than it did a month ago.”
Shaw said about 15 percent to 20 percent of Iowa ethanol producers still are offline.
“You might say, ‘Wow, that sounds a lot better than 50 percent,’” Shaw said. “Even where we are today is the worst we’ve ever been, other than the fact that it was even worse a few weeks ago.”
AAA tracks gas prices down to a county-by-county level along with breakdowns by state or metropolitan area. The average unleaded gallon of gas is $2.10 in Iowa, down from $2.52 at this time last year.
Mark Peterson, AAA regional spokesman, said the very gradual increase in prices happening now is a result of the lower demand.
“Normally during the summer, you’d get a market increase with a lot of travel,” Peterson said. “Obviously with COVID-19, that’s not the case.”
As travel increases slowly, Peterson said more people also are limiting vacations to one-day trips to avoid staying at hotels.
That means fewer miles and fewer gallons of gas.
He expects prices to “ebb and flow” with no clear timeline of how soon it’ll take to return to pre-pandemic levels.
“Your guess is as good as mine,” Peterson said.
Other factors aren’t much easier to predict. Shaw, with the Iowa Renewable Fuels Association, said losses from trade tensions and EPA policy “haven’t gotten better.”
“We’re almost four months in, and there are no signs we’ll be out of it in weeks,” Shaw said. “We’re looking at months more of climbing out of this, and hopefully we’ll count that in months, not years.”
Shaw said the 2008-09 recession also was a “terrible situation” for the ethanol industry. This could last much longer.
Should ethanol factories go into bankruptcy and consolidation occurs, Shaw and Judge said it could dramatically hurt rural economies. More than half of ethanol and biodiesel plants in the state are under local ownership, according to a 2016 study from Agriculture and Biofuels Consulting.
Farmers, in the meantime, have some difficult challenges ahead.
“That decision needs to be made. Are we doing this or are we not doing this?” Lillibridge said.
Lillibridge’s financial bottom line is “way in the red,” but he still needs to plant seeds to avoid falling behind for future years’ crops. That means putting in money for fuel, seed and labor without any income.
“To not plant a crop is really not an option whatsoever,” Lillibridge said. “It puts us in a horrible position.”
If the government “doesn’t step in and provide some support,” Shaw said the industry could see “very, very bad” long-term consequences.
“All that we can do is what farmers have always done,” Shaw said. “Roll up our sleeves, and get to work and try to fix this thing.”
Comments: (319) 398-8394; john.steppe@thegazette.com
"impact" - Google News
June 26, 2020 at 09:43PM
https://ift.tt/388s2SO
Coronavirus levels 'devastating' impact on Iowa ethanol industry - The Gazette
"impact" - Google News
https://ift.tt/2RIFll8
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
Bagikan Berita Ini
0 Response to "Coronavirus levels 'devastating' impact on Iowa ethanol industry - The Gazette"
Post a Comment