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Agricultural News


RFA Analysis: Ethanol Industry Could See $10 Billion in Losses Due to COVID-19

Mon, 20 Apr 2020 15:38:53 CDT

RFA Analysis: Ethanol Industry Could See $10 Billion in Losses Due to COVID-19 As the COVID-19 pandemic and crude oil glut continue to ravage world fuel markets, U.S. ethanol sales in 2020 could fall by more than $10 billion and the industry's contribution to gross domestic product (GDP) could drop by nearly one-third, according to a new analysis released today by the Renewable Fuels Association (RFA). The economic losses stem from a "pernicious combination of steep production cuts and sharply lower prices" in response to COVID-19 stay-at-home orders and the resulting collapse in fuel consumption, according to the report.

RFA warned that these economic damages go far beyond the ethanol sector. America's farmers will also be negatively impacted, as ethanol typically provides a market for two out of every five rows of corn and more than one-third of the annual sorghum crop. Meanwhile, the industry normally supports 350,000 jobs across all sectors of the economy, and contributes valuable co-products like distillers grains, corn distillers oil, and captured carbon dioxide to the food supply chain.

Building on the results from a recent Purdue University study, the RFA analysis estimates that ethanol production could fall by approximately 3 billion gallons in 2020, representing a nearly 20 percent cut from levels that would have otherwise been expected. Mainly due to lower usage and high inventories, ethanol prices could be 56 cents per gallon lower on average from March to December than they otherwise would have been; as a result, ethanol sales fall to $12.5 billion in 2020, a 46 percent reduction from the $23 billion that would have been expected absent COVID-19.

"This sobering new analysis underscores the magnitude of the economic devastation being suffered in the ethanol industry," said RFA President and CEO Geoff Cooper. "Roughly half of the ethanol industry is shut down today, as fuel demand has collapsed in response to COVID-19, and it is clear we have a long and bumpy road to recovery ahead of us. Corn demand and prices have plummeted as plants have idled, jobs are being lost, and rural communities are being destabilized. On the heels of last week's agriculture relief package that excluded any assistance for ethanol, we urge the administration and Congress to take immediate action to help the renewable fuels sector survive. We simply cannot afford to lose an industry that has become part of the fabric of rural America."

In its annual economic impact analysis for 2019, ABF Economics found that the ethanol industry contributed $43 billion to U.S. GDP and supported nearly 350,000 jobs in 2019. But based on today's RFA analysis, it is expected that the industry's contribution to GDP could shrink to $30 billion in 2020, nearly one-third less than last year. Further, if the scenario in the RFA analysis plays out, the industry would support nearly 280,000 jobs across all sectors in 2020, a reduction of about one-fifth from 2019.

Click here for the report: The Economic Impact of COVID-19 on the Ethanol Industry


   

 

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