Corn growers in Wells and surrounding counties were hoping to see production resume this year at an ethanol plant operated in Bluffton by Valero Renewable Fuels Co.
The facility was among two of three ethanol plants that Valero Energy Corp. had shut down temporarily only a year after purchasing them from Green Plains, Inc. in 2018, according to a November Bloomberg report.
Valero Energy is the San Antonio-based parent company of Valero Renewable Fuels. Operations of the Bluffton plant were suspended for a “turnaround” with plans to resume “as soon as favorable economic conditions exist,” Bloomberg had said.
“The temporary suspension of activities there was due to ethanol supply and demand — we hope it is just a temporary situation,” said Bill Horan, a Purdue University Extension educator for agriculture and natural resources who also does community and economic development work in Wells County.
“They purchase a majority of the corn in our county. When they’re at full capacity, they actually purchase a lot of corn from even the surrounding counties,” Horan said.
Beyond the impact the plant’s grain purchasing interruption was likely to have on the area’s corn prices, to reach other buyers, “the farmers will probably have to haul their grain a little further,” he said.
The company did not immediately respond to requests for information on when its Bluffton production might resume, or on any other plans it might have for the facility.
A recent report on Valero’s financial performance showed the company’s ethanol business segment experienced a $43 million operating loss during the third quarter, compared with earnings of $21 million for the same period last year.
“The decrease in operating income was attributed primarily to higher corn prices. Ethanol production volumes averaged 4.0 million gallons per day in the third quarter of 2019,” it said.
The business segment’s profitability probably was not helped by the trade war impact on demand for U.S. ethanol exports.
Chet Thompson, president and CEO of the American Fuel & Petrochemical Manufacturers, testified on the impact of export demand as well as Renewable Fuel Standard blending quota waivers during an October Congressional hearing.
He told members of the House Energy and Commerce Subcommittee on the Environment and Climate Change that U.S. ethanol production was down 1.9% last year, “explained by a large decline (15%) in exports,” according to an AFPM summary of his testimony.
Despite the decline, U.S. ethanol production was running at the second highest rate on record, he said.
However, one of the challenges the corn industry has been facing, according to James Mintert, director of Purdue’s Center for Commercial Agriculture, “has been the fact that ethanol usage has plateaued,” he said in its 2020 Ag Outlook webinar.
The year Congress passed the Renewable Fuels Act establishing 10% ethanol blending quotas for gasoline, only 14% of the U.S. corn crop was going to ethanol production, and 55% was going to feed, Mintert said.
In recent years, both categories have been purchasing close to the same amount, at a little less than 40% each, he said.
“We had that really good time in the industry when we had that surge in demand coming from the ethanol sector,” Mintert said.
“It took a while for the industry to catch up from a supply-side perspective, but now that we’ve caught up, we’re kind of looking for that new source of demand, and that’s really been the challenge for the industry here in recent years,” he said.
Because the blend RFA requires for gasoline is 10% ethanol, he said a demand shock pushing up corn prices could result from a widespread movement to E15 gas, which would be a 15% ethanol blend.
“Longer term, the growth in population of the world, and more importantly, the growth in per capita income, would be positive toward feed and residual use,” Michael Langemeier, associate director of the center, said in the webinar.
The issue has an impact on northeast Indiana’s economy because corn and soybeans are the region’s major field crops.
Preliminary district estimates released by the U.S. Department of Agriculture in November showed northeast Indiana’s 2019 planted corn acreage fell 13% from the prior year to 455,000 acres.
The region’s 2019 average corn yield of 163 bushels per acre was down 8% from 178 in 2018.