Ethanol demand is crawling back

Ethanol demand is crawling back from its late March drop because of COVID-19, according to one ag economist.

Scott Irwin, from the University of Illinois, tells Brownfield that the ethanol industry was going through a period of heavy losses before the pandemic hit. The drop in miles driven cut gasoline use and ethanol demand. Irwin states, “Due to the severe price drop, about half of the plants in the U.S. had to shut down.”

He says that ethanol prices have improved to become more attractive since the most sever periods of people sheltering in: “We’ve had a very steady recovery in operating profits and the industry actually returned to profitability some time in May, and this summer had the highest profits it’s experienced in the last five years.

Some of the economic recovery in the industry is thanks to the help from ethanol co-products. “We had a really bullish market in DDGS for a couple months between late March and mid-May,” Irwin notes. “DDGS prices went up about 30 percent.”

Ethanol plants that remained in operation after the COVID lockdowns generated a total profit exceeding $200 million through July.