It could be months before our industry fully recovers from the COVID-19 downturn, and we might not be the same on the other end. Hold on, though, because that’s not a totally bleak prospect. The pandemic struck our industry hard—it has been the worst period most of us have ever seen—but it has also given us an opportunity to look inward. The last five months have been a period of awakening and change for our industry, and 2020 might ultimately be remembered, not as the year ethanol was knocked off its feet, but the year our producers became more diversified biorefiners.              

In our September issue's cover story, “Market Move,” Lisa Gibson reports that a number of U.S. ethanol producers are moving deeper into high-end alcohol production after experiencing sanitizer sales during the pandemic. As Gibson reports, COVID-19 has not only pointed them toward diversified alcohol production, but also illustrated how crucial diversification is. As the industry works to regain its footing, producers in several states—California, Iowa, Nebraska and Illinois among them—are investing in high-end alcohol production. It’s not just hand sanitizer, but other disinfectants, pharmaceuticals, fragrances, cosmetics and more. The alcohols they produce for these markets will have twice the market value, and perhaps more, than fuel ethanol—making the ROI on plant upgrades easy to justify.

Like the U.S., Brazil has also seen declining demand for fuel in the face of COVID-19, and producers there, too, are turning to non-fuel alcohol production. Brazil’s tightened market, coupled with the strict requirements of its biofuels program, have tapered opportunities for U.S. ethanol there. As Matt Thompson reports in “Narrower Access,” Brazil, with its massive sugar cane ethanol industry and growing corn ethanol interests, is not only the No. 2 ethanol producing country in the world, but also second in the number of confirmed COVID-19 cases, at more than 3 million in early August. Like in the U.S., the pandemic has hit the country’s biofuels sector hard. Fewer people driving means less ethanol is being consumed. All of these issues have coalesced in a “perfect storm” for biofuels and made exporting ethanol to Brazil less viable this year. As Thompson’s story explains, however, U.S. ethanol producers able to meet Brazil’s new traceability requirements—ducking in under the country’s 20% tariff rate quota or eating the loss above it—may see opportunities others do not.

Here in the U.S., growers didn’t plant as much corn as initially projected, but it’s still 3 million acres more than last year and possibly a record crop. At the very least, the 92-million-acre crop, cradled by mostly ideal growing conditions, will meet all needs and keep corn prices stable. As Luke Geiver reports in “Less than Expected, More than Enough,” growers stepped off their aggressive planting intensions—at one time, a whopping 97 million acres—in the wake of the pandemic and lingering trade uncertainty with China. That would have probably resulted in a glut of U.S. corn, analysts say, which would have been fine for ethanol producers but bad for farmers. As it looks now, the crop should result in volumes and prices—$3.40 to $3.60—that work for everyone.


Author: Tom Bryan
President
BBI International