Ethanol company at sunset

Ethanol companies, such as POET, have been operating at reduced capacity during the COVID-19 pandemic.

The phrase ‘the new normal’ is being thrown around by just about every company in the United States right now. As coronavirus affects the way companies are doing business, many are changing the ways they are approaching what used to be normal to them.

However, some are hoping life can get back to the original normal quickly.

“We want to get things back to normal, but more than that, we want to get things back to where we think they should be,” said Doug Berven, vice president of corporate affairs for Midwestern biofuel giant POET. “We want an ethanol industry that takes more of a market share of the fuel supply.”

POET has had to deal with various effects of the pandemic, including the major drop in travel due to the various lockdowns across the United States. Berven said as travel dropped to 50% of normal, fuel use came down at the same rate.

“That means 50% of our industry has shut down, and that’s absolutely devastating,” he said.

Oil prices also dropped significantly, even falling negative for a period of time due to the lack of demand in the marketplace. Combined with ongoing issues with production in Russia and Saudi Arabia and it’s been a struggle for the ethanol producers.

Berven said that struggle has an unfortunate ripple effect as farmers hope for another year of big yields. POET is operating at 75% capacity as July begins, he said, although at one point they were down to nearly 50% capacity.

He said being below full capacity, combined with the USDA’s estimation for more than a 3 billion bushel corn carryout, is a major concern.

“Twenty-five percent of the grain purchases that would typically happen from an ethanol standpoint are just not happening,” Berven said. “That is a tremendous amount of grain. Our industry buys somewhere between 35-40% of the U.S. corn crop on an annual basis. When 25-50% of that is shut down, you can just imaging the devastation it has for farmers and grain prices.”

While the ethanol deliveries are affecting many farmers, one eastern Iowa producer said he hasn’t been too affected when delivering yet.

Hans Schnekloth, who farms near Eldridge, Iowa, said most of his crop goes to river terminals or a corn syrup plant, which allowed him to avoid some of the major impacts.

“That was a bonus because I know ethanol production was impacted,” Schnekloth said. “People were stuck at home and they didn’t need to drive, but they needed their sugar.”

Some of the major changes Schnekloth saw due to coronavirus were changes at a few of the terminals he frequents — from removing contact with pass-through windows for paperwork or removing the need for tickets, opting to give any ticket numbers over the radio.

He said marketing has remained relatively the same, but they have changed some of their strategy approaches due to coronavirus impacts on pricing.

“We are looking at maybe doing some basis contracts because right now the basis is pretty favorable this fall,” he said. “I’m hoping if we get those big numbers locked in then maybe the actual corn price will improve marginally. I’m not expecting a huge spike, because it looks like supply will be there, even with the reduced acres as it sits right now.”