Perhaps no commodity has felt the negative consequences of the COVID-19 pandemic more than ethanol, and thus corn, as gasoline usage declined dramatically during the stay at home restrictions took effect.
The United States exported 96,000 barrels per day (b/d) of fuel ethanol in 2019, the first annual drop in U.S. ethanol exports since 2015. Despite the decrease, total exports remained at the second highest level on record.
Farm groups and ethanol producers got a big win as the Trump Administration decide not to seek a re-hearing of a recent ruling by the U.S. Court of Appeals for the Tenth Circuit that struck down certain small refinery exemptions (SREs) under the Renewable Fuel Standard, according to a release from the National Corn Growers Assn.
U.S. Environmental Protection Agency (EPA) Administrator Andrew Wheeler and U.S. Department of Agriculture (USDA) Secretary Sonny Perdue report that President Donald Trump successfully negotiated an agreement on the Renewable Fuel Standard (RFS).
With more than one-third (34.5%) of the annual U.S. corn crop used in the production of fuel ethanol, sooner or later, declining production of ethanol will be felt by corn growers; not necessarily a good trend for ag equipment makers or dealers.
The growth in corn ethanol use helped fuel the farm equipment boom between 2008-14. Exports of the fuel additive have contributed to its increasing use during this period as the U.S. exported the fuel to 35 different countries in 2015.
With ethanol using slightly more than one-third of all corn produced in the U.S., it has been the single largest factor in rising prices for corn in recent years.
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In this episode of On the Record, brought to you by Associated Equipment Distributors, Deere Director of Investor Relations Josh Beal told JP Morgan analysts that the OEM is confident it will be “producing to demand” in fiscal year 2025.