Massive flooding in the Midwest has knocked out roughly 13 percent of the country’s ethanol production capacity, as plants in Iowa, Nebraska and South Dakota have been forced to shut down or scale back production by the devastation.
Production facilities owned by large companies like Archer Daniels Midland Co. and Green Plains Inc. were still operating despite days of snowstorms followed by rains that sent record floods into the Farm Belt.
However, with rail lines washed out, and corn in storage flooded, production is dropping off, sending prices spiking in markets that buy the corn-based fuel.
The United States has some 200 ethanol plants capable of producing 1.06 million barrels per day. About 100,000 to 140,000 barrels per day of capacity has been taken offline due to the floods, according to three traders who track operations.
The disruption comes as the ethanol industry is in the midst of a historic downswing due to the trade conflict with China and sluggish domestic demand growth that has led to high inventories and weak margins.
The industry has pinned high hopes on increasing demand when the government approves regulations for year-round sales of E15, a higher blend of ethanol.
For now, the floods will boost margins for those plants still operating, but could be punishing for firms recovering.
Among the plants that have scaled back is ADM’s plant in Columbus, Neb., the largest in the United States, due to flooding of a small rail line serving the plant, said Chris Cuddy, president of carbohydrate solutions at ADM.
The company said Thursday that production is limited, without providing specific details. The plant usually can produce 413 million gallons annually, according to the Nebraska Energy Office.
“We haven’t been able to get (corn) to them for at least for a week because of the flooding and the roads washed out,” said Justin Mensik, 19, of Morse Bluff, Neb., who grows corn that supplies ADM’s Columbus plant.
In Arlington, Neb., a rail line was overrun by water, forcing its closure; contractors in the town said the line transports agricultural products like corn to other facilities. Roads to that line were also closed, and workers using diggers could be seen pulling out debris and using heavy rocks to fill holes.
“Transportation is definitely affected. All rail cars were put on hold since last Friday and they were not allowed to be sent out. We are not sure when it will be back to normal operations,” said Scott Tingelhoff, general manager at AltEn, an ethanol processor in Mead, Neb., which produces about 24 million gallons a year.
Mike Jerke, chief executive of Southwest Iowa Renewable Energy, which runs a 120-million-gallon-a-year ethanol plant in Council Bluffs, said he has had to cut production.
Corn farmers who provide feedstock still are digging out from the flooding, and some already have determined some of their supplies are unsuitable.
Omaha-based Green Plains, which has a market value of $700 million, said its five Nebraska plants are dry, but nonetheless face rail transportation challenges. The company is looking for ways to work around the flooding, such as unusual trucking routes, said spokesman Jim Stark.
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“It may take a couple of weeks to understand the total impact of the flooding,” Stark said.