Some Midwest Farmers Struggle With Historic Floods, Ohio Valley Ethanol Producers See Profit Boost

Apr 1, 2019

Mick Henderson runs the Commonwealth Agri-Energy ethanol plant in west Kentucky. He said the past year for U.S. ethanol producers, including in the Ohio Valley, has been rough.

“We’ve just passed our 15th anniversary just now, and this is going to be one of our weakest years,” Henderson said.

Ethanol prices have been down the past year because supply of the grain-based fuel is at a record high. Retaliatory tariffs on corn from countries like China have also hurt prices, because corn and grain targeted by tariffs are used by ethanol plants.

Henderson said flooding has shut down some ethanol production farther west in Nebraska, Iowa, and South Dakota. The plants closed down in those three states reportedly make up a sixth of U.S. ethanol production. Ohio Valley ethanol producers are seeing a short-term boost to their profits because they’re making up for that lost supply, but he said the help is minimal.

“If I were losing ten cents a gallon. I would be break even today,” Henderson said.

Like many Ohio Valley farmers, he’s also hoping for tariffs on corn to lifted soon once trade negotiations with China are resolved.

“Such a large part of our commodity market goes to China, including ethanol, and the tariffs are just too high that it pretty much shut it off. So we’re waiting with bated breath on that deal.”

On the other hand, farmers who provide corn and grain to these ethanol plants are generally protected against the struggles of the ethanol industry.

Ohio Corn and Wheat Growers Director of Government and Industry Affairs John Torres said most farmers lock in the prices they get for their corn months in advance.

“If you’re a large enough farmer, you’re going to enter into delivery contracts or price contracts, whether it’s a grain elevator, a pet food processor or an ethanol plant,” Torres said.

Most Ohio Valley ethanol producers are waiting out the effects of the trade war and looking to other priorities. Three Rivers Energy commodities manager Wade Sauerbrey in east Ohio says ethanol prices can change quickly.

“I think everybody’s just playing it close to the vest here to see what happens. You get one tweet from somebody, and there’s a knee jerk reaction in the market,” Sauerbrey said. “And you’ll see a little bit of uptick [in prices].”

Sauerbrey said one of those priorities is a proposed Environmental Protection Agency rule to allow E15 fuel, a gasoline mix that uses more ethanol, to be be sold year-round. Many ethanol producers say it could be a boon to their industry. The Clean Air Act prohibits the summertime sale of E15 fuel, due to concerns of increased air pollution.

The EPA is taking public comment on the rule through May.