From Farm Policy Facts
COVID-19 is having a devastating impact on the U.S. biofuels industry.
Biofuels are vital in strengthening U.S. energy independence, meeting important Clean Air Act requirements, and creating good paying jobs on Main Street and a significant market for America’s farmers. And, under normal circumstances, biofuels also help Americans save money at the pump.
But these times are hardly normal and the COVID-19 pandemic is decimating the biofuels industry.
Last month, ethanol production dropped by more than 40 percent compared to the same month last year. Biofuel production in April of last year averaged just over 1 million barrels per day while this year’s production is averaging 585,500 barrels per day.
Prices have plummeted, resulting in the moth balling of biofuel plants or plants operating at a small fraction of capacity, with losses estimated at more than $25 million a day.
This is a serious, direct hit to America’s heartland.
The closure of biofuel plants is having a ripple effect from the plant floor to Main Street and the farm field, including severely depressed crop prices, laid off plant workers, and lost economic activity in rural communities across the country.
To stem the flow of financial devastation, farm and biofuel advocates are urging Congress to act now.
Last week, a coalition wrote to the House and Senate urging Congress to put relief measures into place for the biofuels industry and its supplying farmers. They wrote:
The situation we face is dire. More than 130 biofuel plants have already partially or fully shut down as motor fuel demand plunged to 50-year lows. America’s biofuel plants purchase annually more than one-third of U.S. corn and U.S. soybean oil, and the loss of those markets has depressed farm income and will continue to push corn and soybean prices down dramatically.
COVID-19 represents an unprecedented threat that has already harmed a wide swath of the food and farm supply chain, they noted.
As a result, Members of Congress asked House leadership to include financial aid for the American biofuels industry in the next COVID-19 financial relief package, writing:
Prices are at record lows, and producers are unable to make ends meet. These dire statistics translate into devastating economic impacts throughout the economy, as rural job losses mount in our districts, agricultural commodity prices fall precipitously, hurting farmers, and shortages of biofuel co-products impact food security.
Thanks to these and similar efforts, the House approved legislation that would provide direct relief and Senators Chuck Grassley (R-IA) and Amy Klobuchar (D-MN) introduced a bipartisan relief proposal in the Senate.
These legislative efforts would temporarily lend a helping hand to biofuel producers by authorizing the U.S. Department of Agriculture to provide relief payments for COVID-19 related losses.
“The Renewable Fuel Reimbursement Program represents a potential lifeline for the 350,000 men and women whose jobs depend on a healthy and vibrant ethanol industry,” said Renewable Fuels Association President and CEO Geoff Cooper of the House proposal.
Political realities mean that the House-passed bill will need to be reconciled with White House and Senate objectives, including the Grassley-Klobuchar bill. But it’s critical that biofuels relief weathers the process and becomes law soon.
Biofuel producers are doing all they can to keep the doors open and workers on the payroll, including supporting our public health efforts by repurposing ethanol and glycerin supplies to produce hand sanitizer.
However, these efforts are not enough to keep the doors open and workers on the payroll. Urgent relief is needed.