Ethanol industry facing $8 billion COVID bill

The head of the Renewable Fuels Association (RFA) has said the impact of the COVID-19 crisis is set to cost ethanol producers $8 billion in losses for the year as it called for state aid.

The association which represents the US ethanol sector warned pressure on fuel prices and a slump in demand is set to force firms to look at redundancies and limits on production

Speaking as the US Congress and administration continue negotiations on another potential COVID-19 relief package, RFA President and CEO Geoff Cooper warned the sector was reaching a tipping point.

The association warned a new study by conducted by economists from the University of Florida and Arizona State University found that ethanol producers will experience roughly $8 billion in losses this year due to the pandemic’s impact on world fuel markets.

“The COVID-19 pandemic in 2020 had a major negative impact on US ethanol, gasoline, and oil prices and production,” the authors found. “COVID-19 has had a major impact on ethanol production. The producer loss due to COVID-19 is $7 billion.”

The estimated economic loss grows to a range of $7.9 to $8.6 billion when unemployment effects are included. The authors acknowledge that those estimates likely “understate the cost of COVID-19” to the ethanol industry because the impact of the pandemic on co-product output, demand and prices is not included.

Mr Cooper said the new study corroborates the findings of an RFA analysis published in July, which found pandemic-related losses could be $7 billion or more in 2020. According to RFA, the study also underscores the importance of ensuring ethanol producers are not again left out of any stimulus package that may move forward in the weeks ahead.

“This new, independent study confirms what has already been made painfully clear to the 350,000 men and women whose jobs are supported by the ethanol industry,” he said. “The COVID-19 pandemic caused fuel demand to plummet and forced scores of ethanol plants to shut down, resulting in steep economic losses for the industry. While market conditions have improved since the spring, the ethanol industry is still struggling to fully recover from the pandemic, and ethanol producers across the country remain under financial stress.”

Mr Cooper urged lawmakers and the administration to ensure emergency relief for ethanol producers is included in any forthcoming coronavirus aid deal.

“There is strong bipartisan support for providing assistance to renewable fuel producers in both the House and Senate,” Cooper said. “The HEROES Act passed by the House in May included emergency relief provisions for ethanol producers, and a similar measure was introduced in the Senate by Sens. Grassley and Klobuchar. We remain hopeful that a fourth COVID-19 aid package, with emergency relief for ethanol producers, will finally be pushed over the goal line in the weeks ahead.”

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