US ethanol production could fall by 3 billion gallons in 2020: trade group

Houston — US ethanol production could fall by 3 billion gallons in 2020 due to the coronavirus pandemic, an analysis by a key ethanol trade group estimated Monday.

The pandemic could also cost the industry $10.5 billion in sales, according to the study.

"The impact on the ethanol industry has been swift and sharp," the association said in its study.

More than 70 US ethanol plants have been idled due to the pandemic and another 70 have reduced production, the study said. At least 46% of the industry's total production capacity is offline.

"This cutback is unprecedented in its depth and speed," the association said.

As governments have ordered residents to shelter-in-place to contain the virus, demand for motor gasoline as well as for its blendstocks such as ethanol have plunged.

According to the US Energy Information Administration, US ethanol production fell to 540,000 b/d, the lowest level since the agency began tracking such data in 2010. Market sources have told S&P Global Platts that production is expected to decline further in the next week or two.

Prices have slumped as well. Platts assessed benchmark Chicago Argo ethanol at 90.75 cents/gal on Monday. Argo prices have fallen as low as 83.10 cents/gal in April, the lowest since Platts began assessing ethanol in 2008.

The economic woes plaguing the ethanol industry have spread to other markets as well. As production of the biofuel has declined, demand for corn has tumbled. Front-month CBOT corn futures on Monday settled at $3.1425/bu, a multiyear low. The ethanol industry is one of the top users of US corn.