Harsh Winter and Rail Delays Impact Ethanol Industry

A harsh winter, shortage of rail cars to ship ethanol, and higher gasoline prices are causing increased prices at the gas pump this spring. Recent media reports blaming only ethanol for the higher prices are not telling the whole story, says Indiana Corm Marketing Council (ICMC) Biofuels Director Ken Parrent. Current higher ethanol prices are a result of a shortage of rail cars exacerbated by an unusually harsh winter. “The delays in moving ethanol trains from western U.S. to the New York east coast market have led to shortages in key markets and caused some western ethanol plants to slow or suspend production,” says Parrent. “This logistic problem is causing higher ethanol prices right now.”

In addition to rail delays, refiners are blending higher priced premium gasoline to make the octane grade for regular unleaded – blending that would normally use lower priced ethanol. Indiana’s location, relative to east coast demand centers, provides an advantage over western ethanol plants that primarily rely on trains for shipping ethanol. “Fortunately, Indiana ethanol plants have been largely unaffected by the rail logistics crisis because most of Indiana’s ethanol is shipped by truck. Indiana plants are running at maximum capacity to help ease the shortfall in ethanol supplies,” says Parrent.

The railway delays come at a bad time for the American ethanol industry as the oil industry argues in favor of repealing the nation’s renewable fuels energy policy known as the Renewable Fuel Standard (RFS), and the proposed 2014 Renewable Volume Obligations (RVO) that reduce the volume of ethanol to be blended citing the inability of the ethanol industry to provide an adequate supply of ethanol blended fuels to the consumer. The RFS is the federal law that requires the blending of domestic, renewable, cleaner-burning corn ethanol in the nation’s fuel supply.  “Indiana corn farmers believe in biofuels as an important part of our country’s energy portfolio and as an important industry in many of our rural communities,” says David Howell, chairman of ICMC’s ethanol committee. “With just over 1 billion bushels of corn grown here in the state last year, Hoosier corn farmers are meeting the demands of all of our customers – including the ethanol industry.”

Reports that unfairly blame rising gasoline prices on corn farmers are misleading to the consumer and generated by the oil industry who doesn’t like competition from the biofuels industry, according to Howell.

“There is plenty of corn being produced by our nation’s corn farmers to meet both our food and fuel needs at a reasonable price. Hopefully, as the weather warms and the rail cars start moving, we will see the market work itself out and ethanol will start flowing again,” says Howell.