In Colorado, following 18 months of record earnings, the U.S. ethanol industry has rebalanced in 2015. As energy prices collapsed in late 2014, so did ethanol prices and plant margins. However, ethanol’s supply and demand has remained well balanced, and producers have maintained positive earnings, according to a new report from CoBank titled, “Ethanol Industry Rebalances.” Looking ahead through 2016, the report says plant operators will face dueling positive and negative shifts in the market that are likely to result in lean, yet positive margins.
The industry will see little growth in domestic sales as a result of improving fuel efficiency in the nation’s vehicles and changes to the EPA’s renewable fuels blending mandate. The EPA’s proposed alteration to the Renewable Fuels Standard (RFS) is expected to be approved later this year, and will set a floor beneath the current 10 percent blending level. However, the new policy will not incentivize retailers to sell higher ethanol-blended fuels.
The report cautions foreign markets also pose a risk to ethanol producers. China, which currently imports 60 percent of U.S. distillers grains, is expected to change its grain policies to discourage the import of corn-alternative feed grains. These changes could significantly impact producers’ bottom lines.