Senators urge USDA to aid biofuel industry

Senate Finance Committee chairman Chuck Grassley (R-Iowa) and 14 other senators have asked the US Department of Agriculture (USDA) to assist the biofuel industry through the Commodity Credit Corporation (CCC) because of slashed sales amid the Covid-19 pandemic.

The Coronavirus Aid, Relief, and Economic Stabilization (CARES) Act provided an additional $14bn to the CCC to help stabilize and protect farm income and prices while also maintaining balanced and adequate supplies of agricultural commodities.

"As the country follows the advice of local and state governments and remain at home, motor fuel use has rapidly decreased. ... The decrease in fuel consumption has left production facilities little choice but to idle production or close completely," the senators wrote in a letter to USDA Secretary Sonny Perdue.

Most US gasoline contains at least 10pc ethanol, and as diesel sales decline, demand for biodiesel as a blending component will decrease as well. Farm income and prices for corn and soybeans are directly linked to biofuel demand.

Annual US ethanol output capacity has dropped by more than 3.5bn USG since 1 March as producers reduce operations and idle plants, according to industry trade groups. That is about 20pc of the roughly 15bn USG blended into the gasoline pool each year. About 30-40 plants were fully idle and another 40-50 reduced output as of two weeks ago. US ethanol producer Poet has recently idled three plants and delayed the opening of a fourth.

Meanwhile, the value of biodiesel has dropped by around 37¢/USG since stay-at-home measures were put in place around the world.

According to biofuels industry groups, of the 10 biodiesel facilities that shut down last year, only one has been able to reopen because of market conditions prompted by the Covid-19 pandemic. Large producers announced closures or cuts affecting more than 220mn USG of supply last year, citing uncertainty over the $1/USG biodiesel blender's tax credit and the Environmental Protection Agency's approval of 31 small refinery exemptions for the 2018 compliance year as the primary reasons. As a result, soybean farmers face a potential market shock from lower demand as they move into the spring planting season this year.

In their letter to Perdue, the senators said that ethanol plants purchase 40pc of all corn grown in the US, while biodiesel and renewable diesel producers use over 8bn lbs/yr of soybean oil, creating demand that adds 13pc to the cash price of a bushel of soybeans.

Last week, biofuels and other groups wrote Perdue that "it would be an appropriate use of CCC funds to offset a portion of biofuel producer feedstock purchases during the first quarter".

By Jacqueline Reigle