Boosting Demand to Meet Supply
As the U.S. ethanol industry struggles to regain its strong financial performance of 2013-2014, three new ethanol plants will come online this year and next with a combined annual production of 270 million gallons, adding to the oversupply that’s plagued the industry since 2015.
To reduce the oversupply, the ethanol industry is moving aggressively to boost demand for its product by developing overseas markets of U.S. ethanol. It’s also increasing its market share of the U.S. liquid fuel market by promoting the availability
of higher blends of ethanol such as E15, E30, and E85, which contain, respectively, 15%, 30%, and 85% ethanol in a gallon of gas.
When the three new plants begin operations, they’ll be the first new corn ethanol plants to commence production since the 65-million-gallon-a-year Dakota Spirit AgEnergy plant started up in June 2015 in Spiritwood, North Dakota. Before Dakota Spirit went online, it had been five years since a corn-based ethanol plant had started up.
The three plants coming online are as follows.
• Elite Octane, LLC, which anticipates commencing operations during the third quarter of 2018 as a 120-million-gallon-a-year dry mill ethanol plant in Atlantic, Iowa.
• Ring-Neck Energy &
Feed, LLC, in Onida, South Dakota, which plans to begin producing ethanol late in the fourth quarter or early in the first quarter of 2019.
• ELEMENT, Inc.,a 70-million-gallon-a-year ethanol plant that is under construction in Colwich, Kansas, as a partnership between ICM, Inc., a biofuels process technology provider, and The Andersons, Inc., the Maumee, Ohio, publicly traded agribusiness.
ELEMENT also will demonstrate ICM’s proprietary technologies for producing cornstarch ethanol as well as cellulosic ethanol.
Since 2014, ethanol production has increased by 10.5% from 14.3 billion gallons to 15.8 billion gallons in 2017. Only one new ethanol plant came online from 2015 to 2018. That means most of the 1.5 billion gallons in increased U.S. ethanol production came from existing plants adopting efficiency improvements to squeeze more ethanol out of each kernel of corn and by expanding existing plants rather than building new ones.
Scott Irwin of the Department of Agricultural and Consumer Economics at the University of Illinois summed up the dilemma facing the U.S. ethanol industry in the March 2018 farmdocdaily publication:
“Domestic and export use for U.S. ethanol has increased nicely since 2014, but production capacity and actual production increased even faster. The surge in production basically overwhelmed the rise in use, which caused ethanol stocks to increase and ethanol prices and profits to fall. The fortunes of the U.S. ethanol industry are unlikely to improve until production and use are better balanced. Based on recent production and stocks data, it looks like this could take some time.”
The oversupply scenario for U.S. ethanol has been compounded, Irwin said, by the hardship waivers granted recently by the EPA to some petroleum refiners that exempt them from blending requirements contained in the Renewable Fuel Standard.
The EPA told U.S. Senator Charles Grassley (R-IA) that it has granted hardship waivers for refiners that account for 2.25 billion gallons of bio-fuels in 2016 and 2017.