Drought's toll hits Nebraska ethanol producers hard

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Posted: Wednesday, February 13, 2013 12:00 am

ST. LOUIS (AP) – The persistent drought is taking a toll on producers of ethanol, with corn becoming so scarce that nearly two dozen ethanol plants have been forced to halt production.

The Renewable Fuels Association, an ethanol industry trade group, provided data showing that 20 of the nation's 211 ethanol plants had ceased production over the past year, including five in January. Most remain open, with workers spending time performing maintenance-type tasks. But ethanol production won't likely resume until after 2013 corn is harvested in late August or September.

Industry experts don't expect a shortage — millions of barrels are stockpiled and the remaining 191 plants are still producing. Still, there is growing concern about what happens if the drought lingers through another corn-growing season.

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“There's a lot of anxiety in the industry right now about the drought and a lot of folks watching the weather and hoping and praying this drought is going to break,” said Geoff Cooper, vice president for research and analysis for the Renewable Fuels Association. “If we get back to a normal pattern and normal corn crop, then I think the industry is in good shape.

“But if this drought persists and it has the same effect on this coming corn crop, then we've got a problem.”

The most recent outlook by the federal Climate Prediction Center says the drought is expected to continue or intensify in much of the Midwest and Southwest, including Nebraska and southwest Iowa. The middle and eastern parts of Iowa are in “drought ongoing, some improvement” and “drought likely to improve, impacts ease” categories.

America's ethanol industry has taken off in the past decade. Plants in 28 states produce more than 13 billion gallons of ethanol each year, Cooper said. By comparison, in 2002, the industry produced 2.1 billion gallons. Today, roughly 10 percent of the U.S. gasoline supply is made up of the biofuel.

Roughly 95 percent of U.S. ethanol is made from corn. The National Corn Growers Association estimates that 39 percent of the U.S. corn crop is used in ethanol production.

Corn producers had high hopes going into 2012. Record harvests were predicted.

Then the weather dried up. The drought began before planting and never stopped. Even though more acres were planted in 2012 compared to 2011, 13 percent less corn was harvested.

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Availability of locally produced corn is vital for ethanol plants since having it shipped in is too expensive. To make matters worse, the drought hit hardest in many of the top corn-growing states.

According to the trade group's data, six of the 20 ethanol plants that had stopped production are in Nebraska, two in Indiana and two in Minnesota. Ten states have seen one plant affected. Cooper said the 20 plants employ roughly 1,000 workers combined, but it wasn't known how many have been laid off.

Valero Energy Corp., idled three plants last year — in North Linden, Ind., and Albion, Neb., in June, and in Bloomingburg, Ohio, in December. The company's Albion plant reopened last week.

Five plants ceased production in January alone: Abengoa plants in the Nebraska towns of York and Ravenna; a White Energy plant in Plainview, Texas; an Aemetis facility in Keyes, Calif.; and POET Biorefining's mid-Missouri plant in Macon.

In Nebraska, the latest plant to idle was the Ag Processing Inc. plant in Hastings. The remaining open ethanol plants are running at full capacity to keep up with demand, said Nebraska Ethanol Board administrator Todd Sneller.

Many of the state's idled plants are in operationally ready status and can go online when market conditions improve, he said. While ethanol capacity declined by about 12 percent by the fourth quarter of 2012, he's optimistic about 2013 production, expecting only a “modest reduction” from 2012.

None of Iowa's more than 40 ethanol plants have shut down or idled, but most have pulled back a little and some have pulled back substantially, said Monte Shaw, executive director of the trade group Iowa Renewable Fuels Association. While the drought affected the state, Iowa was fortunate to lose only about 20 percent of its corn yield compared with a typical year, he said.

“That still means 80 to 85 percent of the industry is running,” he said. “Iowa is known as the tall corn state for a reason.”

Still, Shaw said he wouldn't be surprised if an Iowa ethanol plant closes sometime in the next few months.

“I hope it doesn't happen,” he said, “but it's a historic drought. There's going to be consequences.”

The production stoppages are cutting into ethanol production. The 770,000 gallons per day produced in the last full week of January were the fewest since the U.S. Energy Information Administration began tracking weekly data in June 2010.

That's not much of an issue for consumers, at least for now, because there are plenty of stockpiles of ethanol. Purdue University agriculture economist Chris Hurt said the nation has more than 20 million barrels of ethanol in stock, slightly more than a year ago, largely because Americans are driving less and driving more fuel-efficient cars.

Cooper said, though, that stockpiles are expected to dwindle in the spring and summer as demand picks up and plants remain idled.

Brian Baalman farms near Menlo, Kan., and like many growers, he has a direct interest in ethanol. He is on the board of Western Plans Energy in Oakley, Kan., and has stock in seven ethanol plants.

Baalman typically grows 8,000 acres of corn each year. Last year's crop was about one-third of that. This year, he may plant only the one-third of his acreage where irrigation is available.

He said near-record prices for corn, driven up by the drought-fueled shortage, are making ethanol production costs too high.

“We are burning up all our excess cash just to stay running at a reduced rate to keep people working and keep the people there, keep the lights on, so to speak,” Baalman said. “It's very tough right now.

“A lot of these ethanol plants aren't going to make it.”

World-Herald staff writer Emily Nohr contributed to this report.

© 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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