Boost­ing De­mand to Meet Sup­ply

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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.

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