1. Yea I went there in a new #FDD last week. Dove into the data on ethanol production profits during the COVID pandemic. Here is the link to the article farmdocdaily.illinois.edu/2020/08/ethano…
2. This is where everyone starts in thinking about financial hit ethanol industry has taken due to pandemic. Ethanol production off 48% at bottom, same as gasoline use.
3. This is what happened to ethanol plant prices. Even deeper trough than ethanol production. Down 62% at the bottom. How could the ethanol industry not have been absolutely decimated after seeing this?
4. Here is the record of OPERATING ethanol plants during the pandemic. Hmmm. That pattern bears no resemblance to the swoosh pattern in ethanol production and prices. Again, crucial to note that my computations are for plants still in operation after the lockdowns hit.
5. What this shows in that ethanol plants were operating at steep losses before the COVID lockdowns hit, dipped a little, and then have recovered rather nicely to some of the highest levels of the last 5 years in mid July. Average loss of -11cpg before COVID, +4cpg after.
6. Yes, losses would have been catastrophic in about half of ethanol plants did not shut down. Still, how did the plants remaining open manage to snap back to profits so quickly? Answer: DDGS and corn oil rallied on shutdowns and ethanol ultimately recovered faster than corn.
7. Putting ethanol production and profits per gallon together, I estimated profits/losses for operating ethanol plants pre- and post-COVID. Lost nearly $400 mil in 2020 before COVID and made over $200 mil after lockdowns. I think that will surprise a lot of people.
8. Of course, that is not the entire picture. Shuttered plants still incurred fixed costs and a cost to shutter the plants. This is my attempt to account for those costs. My COVID-related loss estimates for the US ethanol industry to date run from -$37 mil to -$116 mil.
9. So where does that leave us? COVID restrictions certainly caused financial damage to US ethanol industry. But losses are at most in hundreds of millions of dollars not billions.
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