Motorists won’t complain when they see gasoline selling for as low as $1.49 a gallon.
Farmers also see benefits as they put fuel in tractors and hit the fields this spring. But just like clouds can bring either needed moisture or devastating flooding, some producers are beginning to brace for the downside that comes with low fuel prices.
“Corn prices tend to follow other commodities, particularly oil prices,” said Gary Marshall, chief executive officer of the Missouri Corn Growers Association. “We saw corn almost dropped to $3 on the May contract on the Chicago Board of Trade. We haven’t seen prices like that since the ‘90s. And, frankly, it’s really going to create a lot of problems.”
Three months ago, it was shaping up as a decent year for the ethanol industry, which serves as a vital market for the U.S. corn supply. The Trump administration eliminated a barrier against the year-round sale of 15% ethanol blends, generating optimism for an industry with an overall capacity to produce 17 billion gallons of ethanol.
Then came the coronavirus, which sparked stay-at-home orders that kept drivers off the road and squelched demand. On top of that, an oil price war contributed to a worldwide glut of fuel, further depressing prices for all blends, including ethanol.
“It’s just killing our markets right now,” Marshall said. “Whether it’s livestock feed, whether it’s exports, ethanol, all three of those markets are down substantially, particularly the ethanol industry. A lot of different factors combined to make it a very serious situation for the ethanol industry right at this point.”
Even though fuel production is considered an essential industry, ethanol production plummeted. Some estimate that the industry reduced capacity by as much as 60%. All six plants in Missouri, including ICM Biofuels in St. Joseph and Golden Triangle Energy in Craig, Missouri, are continuing to operate in some fashion.
“The ethanol industry takes some time to slow down,” said Dwayne Braun, general manager of ICM Biofuels. “We have seen the industry slow down to the 50% rate. Production has gotten to a point where we’re not building excess capacity.”
Golden Triangle still employs 39 people at one of the smaller ethanol plants in the state. General Manager Kelly Bordewick said Golden Triangle has maintained operations and sees some benefit from a diversification into industrial alcohols.
But he said the industry’s struggles will spill over to the producers who count on ethanol to provide fuel to the market price for all corn.
At one point last month, corn futures hit a three-and-a-half year low on the Chicago Board of Trade as weekly ethanol output fell 102,000 barrels per day to 570,000 barrels. On Friday, May corn closed at $3.11 a bushel, down from $3.90 in February.
That kind of price decline will have an impact in rural Missouri. More than 3.6 million acres of corn will be planted in the state this year.
Marshall said corn growers are careful not to complain because they know other ag industries, notably livestock and food processing, may be struggling more from the effects of the coronavirus. But that doesn’t make it any easier to see prices that don’t exactly make farmers feel nostalgic.
“As bad as it is for corn growers, cattle and hog folks and the poultry people simply can’t get their product into consumers’ hands right now,” he said. “This virus is just devastating.”