Oilprice By Robert Rapier - May 02, 2020
In a previous article, I reported that gasoline demand had plummeted to the lowest demand number in more than 50 years. But the COVID-19 pandemic isn’t just impacting the nation’s refiners and oil producers. The U.S. is also subject to a Renewable Fuel Standard (RFS) which consumes most of the nation’s corn ethanol. The steep drop in gasoline demand has had a domino effect, also crushing the nation’s ethanol demand, and subsequently corn demand.
Many ethanol plants have shut down or reduced capacity, and that’s having additional impacts that may not be immediately obvious. For example, many ethanol plants produce and sell carbon dioxide as a byproduct. The U.S. meat industry uses carbon dioxide as a refrigerant and suddenly finds itself scrambling to secure supplies. As Geoff Cooper, president of the Renewable Fuels Association recently stated: “We’re headed for a train wreck in terms of the CO2 market.â€
I spent some time this week discussing the economic impact on farmers with a friend, Kansas corn farmer Jon McClure. He took the picture at the top of the page from his tractor as he and his son Derek worked to get this year’s corn crop planted. From the cab of his tractor, he told me “The irony is that falling commodity prices are going to hit farmers and ranchers hard, even as prices surge further downstream. This is being caused by critical bottlenecks in the supply chain.â€
To better understand the impacts of the COVID-19 impact on the food and ethanol producers in the heartland, I also spoke to Greg Krissek, the CEO of the Kansas Corn Growers Association, and Josh Roe who is Vice President of Market Development and Policy for the team.
More:
https://oilprice.com/Energy/Energy-General/Ethanol-Is-Taking-A-Beating-In-The-COVID-19-Crisis.html
