Ethanol: Yesterday, Today and Tomorrow (May 28, 2020)

Department of Agricultural Economics Author

05/28/2020 Added

45 Plays

Description

Roger Berry, Administrator, Nebraska Ethanol Board. A look at where we have come with ethanol, where we are today due to a multitude of economic disruptions in the ethanol industry—with the big disrupters being federal policy and COVID-19. Plus, opportunities for the future for ethanol, with information on the big picture and what it all means for Nebraska agriculture.

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[00:01:55.140]Jessica Groskopf: Good afternoon. I'm Jessica gross cough and extension educator and regional economist for the Panhandle region in the Department of Agricultural Economics at the University of Nebraska, Lincoln.
[00:02:06.450]Jessica Groskopf: On behalf of the Department, I welcome you to our webinar today.
[00:02:10.230]Jessica Groskopf: This is part of a series of webinars produced by our farm and range management team that focuses on issues related to covert 19th impact on Nebraska agriculture, you can find recordings of these sessions and a schedule of upcoming webinars and other resources at farm W and l.edu
[00:02:30.630]Jessica Groskopf: One of the resources that we would like to quickly highlight is the Nebraska rule response hotline in times of stress, knowing when to reach out is essential.
[00:02:40.230]Jessica Groskopf: The Nebraska rule response hotline can provide mental health counseling information regarding legal assistance financial clinics mediation and more
[00:02:49.050]Jessica Groskopf: The hotlines toll free number is 1-800-464-0258. In addition, a wealth of resources related to stress and wellness can be found at rule wellness.us now.edu
[00:03:03.720]Jessica Groskopf: Today's webinar will not allow you to interact directly with our speaker, you're welcome to ask questions in the chat box located at the bottom of your screen.
[00:03:13.290]Jessica Groskopf: We will ask our speaker to address questions after his presentation as time allows. Today, we are pleased to be joined by Roger Barry administrator at The Nebraska ethanol board.
[00:03:25.920]Jessica Groskopf: The independent state agency was founded in 1971 and works to ensure strong public policy and consumer support of biofuels.
[00:03:34.380]Jessica Groskopf: The Nebraska ethanol board designs and managers programs to expand production market access worker safety and technology innovation.
[00:03:42.840]Jessica Groskopf: Including recruitment of producers interested in developing conventional ethanol as well as bio products from ethanol platform Barry is from Nebraska.
[00:03:52.890]Jessica Groskopf: farmed in the state and has served in senior positions in agriculture organizations, including over three years as the director of market development at The Nebraska corn board.
[00:04:04.500]Jessica Groskopf: Well, let's welcome Roger
[00:04:12.690]Jessica Groskopf: Roger. If you want to unmute yourself real fast.
[00:04:17.940]Roger Berry: That does help, doesn't it, Jessica, thank you for that introduction. Jessica, I certainly do appreciate it. And before I start, I do want to give my thanks to the UL
[00:04:27.600]Roger Berry: Department of Agricultural Economics and this farm and ranch management in our series, you're bringing some great topics that need to be discussed and hope that today's presentation.
[00:04:39.480]Roger Berry: You will find it is a also one of those very important topics we have seen the importance of ethanol over the past several decades increase more and more in this state.
[00:04:50.400]Roger Berry: And so that's kind of what we're going to talk about here today. So with that, I'm going to switch. I have a PowerPoint presentation, I'm going to switch to that PowerPoint presentation and we will get started.
[00:05:16.650]Roger Berry: Well, everything's supposed to work but
[00:05:29.880]Roger Berry: There we go.
[00:05:31.860]Roger Berry: So as I as I thought about this presentation. I thought maybe the best way to talk about how coven is affecting the ethanol industry was to explore it in this way. So that's why I titled this ethanol yesterday, today and tomorrow.
[00:05:49.920]Roger Berry: So, real quickly what our agenda is going to be today is, I've broken this down into those those areas, but I've also added an extra one in there called all most today.
[00:06:00.300]Roger Berry: So with yesterday. We're going to do a quick overview of where the ethanol industry was prior to code 19 and then
[00:06:07.770]Roger Berry: I'm going to throw that other category and they're called almost today, which basically it's going to be the past two to three years.
[00:06:14.010]Roger Berry: And some of the factors that we had going on. It was actually weakening the ethanol industry before we even got hit with this this pandemic called Koba 19
[00:06:25.350]Roger Berry: And then we'll go into where we're at today. What's the effects of COPA 19 been on the ethanol industry. And then I want to talk a little bit about tomorrow. Is there a future in ethanol in Nebraska and in this nation.
[00:06:39.600]Roger Berry: So let's get started on yesterday in Nebraska. We have 25 ethanol production facilities in the state.
[00:06:46.530]Roger Berry: With our Nebraska plants have a capacity to produce 2.6 billion gallons of ethanol.
[00:06:52.920]Roger Berry: I'm going to kind of bounce back and forth between how this relates to Nebraska and how this relates to the nation, so I'll be throwing things in there. I'll try to make sure that I'm letting you know when I'm talking about Nebraska and when I'm talking about
[00:07:05.580]Roger Berry: From a national point of view. So from a national point of view, there are 204 ethanol production facilities.
[00:07:12.090]Roger Berry: And with a capacity to produce 16.542 billion gallons. Now you'll see that there's a total capacity of 16.5 and Nebraska has a the capability to produce 2.6 that puts Nebraska. As the number two ethanol producer in the nation. We're right will only buy Iowa to our east
[00:07:35.910]Roger Berry: So in 2019 Nebraska produced 2.1 billion gallons of ethanol using over 700 million bushels of Nebraska corn which that equates to 35.3% of the total corn grown in Nebraska.
[00:07:51.180]Roger Berry: So for the farmers who are on this call today you can begin to see very, very quickly, just how important the ethanol industry is to your bottom line.
[00:08:00.480]Roger Berry: Especially if you if you grow corn. Now of course there.
[00:08:04.140]Roger Berry: Are other things, sorghum is used in in the production of ethanol and wheat in the past has even been used in the production of ethanol, but the majority of what we use is corn and that's what I'm going to talk about today.
[00:08:15.960]Roger Berry: So before I leave from this slide, I just want to point out, you might notice that I know on the second bullet point I mentioned 2.6 billion gallons and on the
[00:08:26.160]Roger Berry: Fifth bullet point I mentioned 2.1 billion gallons. So what's, what's the deal there are plants have not been running full capacity over the past few years.
[00:08:36.270]Roger Berry: So, well, we've actually never been up to full capacity that 2.6
[00:08:40.200]Roger Berry: billion gallons is what the nameplate capacity of our plans are here in Nebraska and that's what we often use to what what it is that we can produce in the state. So I wanted to point that out to make sure everybody was was clear on that.
[00:08:53.160]Roger Berry: Nationally over the nation ethanol. It has consumed 5.9 billion bushels of corn and that was in 2019. So, there again, it is huge, to the agricultural industry.
[00:09:08.430]Roger Berry: In
[00:09:09.720]Roger Berry: And then again in 2017 the Nebraska ethanol board had the
[00:09:16.230]Roger Berry: Department of Economics agricultural economics do up an economic impact study of what Nebraska ethanol means to the state.
[00:09:24.660]Roger Berry: The, the figures that I'm going to give you today are from the last report that was done, which was 2017
[00:09:31.590]Roger Berry: So in 2017 we had almost that same amount of production. If you round that off. You'd be at the 2.1 billion gallons. The value of the ethanol produce was $2.87 billion.
[00:09:44.280]Roger Berry: total value of all products that they are ethanol plants put out, which would be the CO products, which would be corn oil distillers grains everything that's involved there was 3.76 billion.
[00:09:57.660]Roger Berry: Here's the big part for our rural communities. And keep in mind that these jobs are all in rural communities 1453 full time equivalent jobs employees and those are direct employees of the ethanol plants.
[00:10:13.140]Roger Berry: labor income of 109 million and indirect business taxes of 13 million was paid here in the State of Nebraska.
[00:10:20.400]Roger Berry: So the overall economic impact when you take into account the spin offs and everything that the ethanol plants effect, we have an employment of 5166 full time equivalence
[00:10:31.470]Roger Berry: Total labor income of 370 million and a total output from our ethanol plants have $4.154 billion.
[00:10:40.320]Roger Berry: Now the study in 2015 actually came up that are ethanol plants contribute a total of $5 billion dollars to the state's economy.
[00:10:49.710]Roger Berry: And oftentimes, you'll if you hear me talking about things. I often refer to that 5 billion, because that is normally what our ethanol plants are going to contribute to our state.
[00:11:00.450]Roger Berry: And if things would get better. We can do even better than that. But the difference between 2015 and 2017 was simply the price of ethanol. And that's why the total, total output went down just a little bit in terms of dollars.
[00:11:17.130]Roger Berry: So now let's go to almost today, keeping in mind that almost today is covering the past two to three years, somewhere in that area.
[00:11:27.120]Roger Berry: What are the two main things that started a week in the ethanol industry back in 2016 1718 19 somewhere around that area. There's two things that you can really point out one is the small refinery exemptions and to his trade.
[00:11:44.610]Roger Berry: The small refinery exemptions. We have a lot of small refiners who can according to the Renewable Fuel Standard can request to be exempted from the Renewable Fuel Standard and we've seen in the last few years, the EPA
[00:12:00.540]Roger Berry: approving a whole lot more of these requests. And there's also been a whole lot more requests that have been submitted to the EPA
[00:12:08.670]Roger Berry: The other thing that we've had coming in is trade restrictions with some of our, our trade issues that we've had going on the past couple of years that has hurt real bad to and we're going to talk about both of these more in depth.
[00:12:23.460]Roger Berry: So let's look into the small refinery exemptions this chart kind of shows us how many there's been over the years starting in 2013
[00:12:33.030]Roger Berry: So in 2013 there were 16 petitions that were received by the EPA and the EPA granted eight of those denied seven
[00:12:42.270]Roger Berry: And 2014 we have 13 with eight of them issue or eight of eight of the grants issued and five denied. And then in 2015 we had 14
[00:12:53.610]Roger Berry: That had petitioned for small refining exemption with seven those grants that were issued and six that were denied.
[00:13:02.250]Roger Berry: Now 2016 is when it starts getting a little bit interesting. We start seeing an increase in the petitions for those small refiner exemptions. So in 2016 we have 22,017 at gross to 37
[00:13:19.440]Roger Berry: It grows to 42 and then
[00:13:23.130]Roger Berry: Which none of these have been approved or denied yet or 2019 because it always runs a year behind when EPA approves the
[00:13:35.250]Roger Berry: Petitions for that for the it's always for 2020 it's always going to be doing.
[00:13:41.040]Roger Berry: Approval on there. So EPA has not made up their mind yet on what they're going to do on any small refinery exemptions for this year, but you can see as you look at that chart that over a 2016 17 and 18 the number of grants that were issued by the EPA group considerably.
[00:14:02.850]Roger Berry: So let's look at this a little bit.
[00:14:05.730]Roger Berry: Closer them.
[00:14:08.220]Roger Berry: I need to move a picture box out of my way, because it's blocking some of my information.
[00:14:13.050]Roger Berry: In 2013 if you look at the estimated gallons that each of those exemptions, or that the total of those exemptions had in there in 2013 we had 190 million gallon
[00:14:24.870]Roger Berry: 2014 210 million. You can read the chart there. I'll go, I'll go to 2016 when it really starts growing, then you will see with all the exemptions that were granted, we're up to 790 million gallon get to 2017 we have 1.8 billion gallons that were exempted from renewable fuel standard and
[00:14:45.330]Roger Berry: 1.43 billion gallons that were exempted from the Renewable Fuel Standard. So if you add all that together. That's 4.04 billion gallons.
[00:14:57.060]Roger Berry: That were exempted from the Renewable Fuel Standard. Now, those were exempted. That doesn't mean that we were actually down as far as blending goes that 4.4 billion gallons, but we could have been there was the possibility that we could have been down that full 4.4 billion gallons.
[00:15:16.800]Roger Berry: What does that do to the industry. Basically the end up the biggest part of it is that it introduces uncertainty in the industry.
[00:15:25.470]Roger Berry: The industry was built with the Renewable Fuel Standard IN MIND KNOWING THAT WE WOULD HAVE THAT guarantee that we can produce those gallons and have a market for them when you start taking away that in that certainty that guarantee that
[00:15:43.170]Roger Berry: That we don't have a place for those gallons to go, then you have that uncertainty that's coming into the market and starts depressing prices and starts making things
[00:15:51.840]Roger Berry: Harder for the industry in order to to make the profit they need to make in order to keep growing this industry.
[00:15:58.020]Roger Berry: But what I really want to point out here is what that means. As far as bushels of corn and you can decide for yourselves how this impacts your pocketbooks then
[00:16:08.790]Roger Berry: If you look at that. The bushels of corn not use for ethanol due to these exemptions with 1,000,000,440 2,000,850 7143 bushels. You're starting to talk some real dollars there that's taking away, not only from the ethanol industry, but from the ag industry as a whole.
[00:16:30.030]Roger Berry: Then what happened with with exports. This is a map exports, which was made up by the US grains Council.
[00:16:39.390]Roger Berry: Which the Nebraska ethanol board is a member of the US grains Council, because of the hard work that they're doing on ethanol. They, they work on the
[00:16:49.530]Roger Berry: Exporting of grains and all form and they consider ethanol to be grains and all forms. So they work very hard to increase the the exports of America and all to four nations.
[00:17:04.470]Roger Berry: If you look at this map this being
[00:17:08.310]Roger Berry: If you're familiar with, with how experts exports were prior to this, you'll see one glaring omission from this map that mission is China.
[00:17:18.150]Roger Berry: China was our number one export place but prior to the the trade problems that we started running into I guess we could call them trade wars.
[00:17:27.720]Roger Berry: And China has not imported any of them now for for some time there was a small load. Just the other day showed up and hopefully that's the sign of things to come and going into China and that will continue to grow. But right now we have been absent China from the market for some time.
[00:17:49.680]Roger Berry: Our potential in in China is up to is have been estimated it up to about 2 billion gallons. So you can see that that hurt hurts really bad that we're not picking up those markets.
[00:18:01.410]Roger Berry: Having said that, and we'll as we'll see later on when we get into tomorrow exports are still actually up
[00:18:08.070]Roger Berry: When you take into other other countries, but just imagine what they could be if we still had China and some of the
[00:18:16.410]Roger Berry: Countries that have dropped out from exports still exporting we would be looking at it even further records in the exports. So the loss of that China market was another factor that came in and
[00:18:29.820]Roger Berry: Weaken the industry and made things really quite tough to where it was hard to turn a profit in the ethanol industry do to those two factors over the past couple years. So a lot of our plants were going into this this era of
[00:18:47.850]Roger Berry: What I'm calling all most today in a weekend position and really didn't need this pandemic to come along. So now let's transition in to today. What happened that cause such a crash with our ethanol demand.
[00:19:08.070]Roger Berry: This chart that you're looking at right now is a chart of the weekly glass gasoline demand.
[00:19:13.920]Roger Berry: And before I do this, I do want to make sure that everybody understands I attended attended a farm doc webinar here a couple weeks ago.
[00:19:22.500]Roger Berry: And they had charts already done up that was just going to do work perfectly for what I wanted to present here today, so I am using their charts, rather than going to the work of recreating my own
[00:19:35.880]Roger Berry: We always like to say rip off and duplicate. And I do think the Illinois Agriculture and Consumer economics for the for the use of these charts.
[00:19:45.930]Roger Berry: But if you look at a wrap the middle of March, things were ticking along pretty good where we're starting to see gasoline usage go up and then covert hit
[00:19:54.480]Roger Berry: people quit driving and you can just see the huge drop in demand of gasoline. So keep in mind that when gasoline demand drops 10% of that gasoline is ethanol. So this is what happens to ethanol.
[00:20:13.230]Roger Berry: It drops right along with it. But there's a little bit of delay in there because it takes it takes a while. You can't just shut an ethanol plant off.
[00:20:22.980]Roger Berry: The production has to continue on for a while and to you as an ethanol producer. You're oftentimes thinking, well, we'll just go into storage with this will keep producing because it's expensive to shut the plant down
[00:20:36.270]Roger Berry: And said to run a plant to if you're not making any money or losing money. But sometimes it's it's the worst of the two evils that you have to take into consideration.
[00:20:45.240]Roger Berry: But
[00:20:47.550]Roger Berry: What happened, basically, when you see the sharp drop there and ethanol. It was lagged a little bit from the the drop sharp drop and gasoline usage because storage started to run out.
[00:21:00.480]Roger Berry: All storage places were getting completely full and there is simply no where to go with the ethanol. That's when we started seeing plants shut down here in the State of Nebraska and we'll get into I'll break those numbers down a little bit for you as to how many plants we had that
[00:21:18.240]Roger Berry: Did idled down. I say shut down. I don't, I don't like to use that word because they don't. They didn't shut down.
[00:21:24.390]Roger Berry: They idled down simply weren't producing ethanol anymore. They still had things that needed to be done in those plants. They didn't just close the doors. But that gives you an idea of the sharp drops that happened when when Copa 19 hit the shores of the United States.
[00:21:43.320]Roger Berry: Right there. This shows graphically exactly what I was talking about when I mentioned the fact that
[00:21:49.590]Roger Berry: The stocks just grew and grew and grew the hit record stocks there about the end of April 1 part of May, and as I mentioned before, there was just simply nowhere to go with the ethanol at that time.
[00:22:04.650]Roger Berry: So maybe something a little more near and dear to a lot of your hearts, then, is where we were at
[00:22:13.440]Roger Berry: In regards to corn usage. You see the very same drops in corn usage about that same time in that April, May team timeframe as what you saw in
[00:22:27.240]Roger Berry: fuel usage and ethanol production.
[00:22:30.600]Roger Berry: So in March. If you look at the red lines there was just 2019 2020 just produce for ethanol, you see from March to April, you have a huge drop in corn grind going into ethanol there. Again, it's because plants were idling down all across the nation.
[00:22:51.240]Roger Berry: What has happened with with ethanol prices. This is information that comes from USDA and they use Iowa, as a representative plant but
[00:23:01.800]Roger Berry: It would be the very same effect in Nebraska. Of course, you, you see.
[00:23:07.110]Roger Berry: Actually, if you look at this price on the charts. You can see exactly what I was talking about, about yesterday, almost today and today.
[00:23:15.030]Roger Berry: If you look at 2014 things were humming along pretty good. We get into 2014 going into 2015 and we have a huge drop
[00:23:23.790]Roger Berry: In prices, that's when we start in on the Saris export start going bad, and all the all the other factors, but those two main factors that I talked about before things throughout 2015 2016 2017 2018 we're just coasting along kind of going in and out of profitability for the plants.
[00:23:45.840]Roger Berry: In a lot of situations using up money that the case that they may have had on hand. And then we get to 2000 the end of
[00:23:56.610]Roger Berry: And that's when you see the huge drop at one point ethanol dropped down to around 60 to 70 cents, I believe it was possibly even 50 cents in some markets, we are seeing an increase now though as plants do start to come back online and and more demand for that ethanol.
[00:24:17.640]Roger Berry: So now let's go in and discuss today. Just a little bit. Where are we at nationally
[00:24:23.130]Roger Berry: As a may 19 2020 and these are numbers that I got from the Renewable Fuels Association only 60 of the nation's 200 for ethanol plants were running at normal output rates.
[00:24:34.530]Roger Berry: With the remaining 144 either completely or partially idle more than 40% of the country's ethanol production capacity remains offline.
[00:24:43.680]Roger Berry: And at the height of this, we had a right around 50% of the nation's ethanol capacity that was offline due to the big reduction in demand for ethanol due to the reduction in well basically do to people park their cars and staying home.
[00:25:03.570]Roger Berry: Let's look at Nebraska, when we are in the worst of the situation of the worst of our plant closures and cutbacks occurred. And there, again, I use that word closures, I should have put that plant idling
[00:25:14.190]Roger Berry: Is what I want to use and cutbacks occurred at the end of March into the first part of a role.
[00:25:20.100]Roger Berry: In that time frame Nebraska had 11 of its 25 ethanol plants idled and another three running at reduced capacity and these these are numbers that I
[00:25:30.330]Roger Berry: Was able to to get they may not be completely accurate, but they're pretty close representation of what the, what the industry looked like the one that's was a little harder to really track and and and
[00:25:44.250]Roger Berry: get a handle on is those that reduced capacity there a little bit harder to know on that so that number may not be accurate, but I figured that we were down about 42% of
[00:25:56.790]Roger Berry: What our normal production normal capacity in the State of Nebraska would be so we fared a little bit better during the worst of the time.
[00:26:05.430]Roger Berry: Than what nationally did because it was about 50% nationally
[00:26:08.760]Roger Berry: But if you take into account other plants that we're probably running it reduced capacity, it might have pushed us up around that 45% which would be good as getting us pretty close to right in line with what the normal was across the nation.
[00:26:25.140]Roger Berry: Things are looking up though I don't want to leave everybody with a bad taste in your mouth and thinking that the ethanol industry is is going to remain that way because it's not
[00:26:36.450]Roger Berry: As of May 26 2020 we now only have seven plants that are idle and from last that I can tell to that are reduced production and I see I use the correct word on this slide. So
[00:26:49.080]Roger Berry: So this has an improvement of the amount of production capacity offline to 32.5% so we've increased 10 percentage points.
[00:26:56.640]Roger Berry: In the amount of capacity or in our capacity that's that's offline here in the State of Nebraska. I think that's great. I think that's huge.
[00:27:03.810]Roger Berry: To the economy here in Nebraska and to our plants here in the State of Nebraska for those plants that have been able to come back online. It's huge. And for those plants that are still idle. It gives them hope to that. The day is coming, but they will be able to bring production back up.
[00:27:22.830]Roger Berry: So now let's take a look for a few minutes at tomorrow is the future promising for Nebraska ethanol. I think it is. I, I, I'm a person that looks at things.
[00:27:36.660]Roger Berry: Is the glass is half full, and most the time that I have my times when I don't see it that way, but with ethanol. I'm looking at it as the glass is half full.
[00:27:46.140]Roger Berry: But there's so many things that come into account for what happens in ethanol. And one of the big things is, what will the federal government do
[00:27:55.920]Roger Berry: What will EPA decide to do next. That's could possibly harm ethanol.
[00:28:03.630]Roger Berry: As we talked about over the past few years, the
[00:28:08.130]Roger Berry: Small refiner exemptions have been very detrimental to the to the industry and as we mentioned,
[00:28:17.070]Roger Berry: Still is not decided, there's 27 applications in if they would go ahead and approve those which basically would be against a court order that they have
[00:28:27.000]Roger Berry: From the 10th Circuit Court, then we will have to have more troubles and continue to see depress prices.
[00:28:36.300]Roger Berry: We are going on the hope that EPA will come to their senses and realize that what they're doing goes against what the Renewable Fuel Standard has that is actual law.
[00:28:48.360]Roger Berry: And they will pay attention to the law and not approve all of those small refinery exemptions when they aren't
[00:28:58.440]Roger Berry: They aren't worthy of being exempted. Now don't get me wrong. The small refinery exemptions. Exemptions are part of the Renewable Fuel Standard law.
[00:29:09.630]Roger Berry: And I don't think there's anybody in the ethanol industry that would deny that there may be some small refiners who due to the Renewable Fuel Standard and may the
[00:29:22.560]Roger Berry: Mixing of ethanol into our fuel supply could put some of those small refiners due to the infrastructure that they would have to invest in
[00:29:30.660]Roger Berry: At risk of having economic damage, but it certainly is not all of the applications that EPA is receiving
[00:29:41.130]Roger Berry: We have some of the bigger oil company. So put applications in and we know darn good and well that it's not due to ethanol, that there may be some economic hardships there so
[00:29:54.030]Roger Berry: It's a lot depends on what's happens with the federal government as to what the, what the production levels look like in the future.
[00:30:03.750]Roger Berry: Opportunities to build out our fuel infrastructure.
[00:30:07.140]Roger Berry: One of the things that's been holding us back is I'm going to be quite honest about this. For those of you who know me I don't mince words and I just kind of put things out there as it is.
[00:30:19.590]Roger Berry: We tell people all the time we promote ethanol all the time we educate people about ethanol all the time. But if they can't get it when they pull into their local fuel station. It does absolutely no good.
[00:30:32.610]Roger Berry: So one of the things we've been working on hard and the Nebraska corn board has been working very hard on the over the years is fuel infrastructure, not only here in Nebraska, but across the nation. We continue to work with those fuel. Fuel retailers.
[00:30:49.470]Roger Berry: showing them the opportunities that they have by converting their stations into offering higher blends of ethanol, especially with a 15 now approved year round. In some situations, there's really not a lot has to be done with those stations and
[00:31:06.090]Roger Berry: They can make a very quick and a very inexpensive.
[00:31:10.800]Roger Berry: Addition to their to their fuel offerings for their for their customers to offer any 15
[00:31:18.090]Roger Berry: There are several programs that are going on right now to, as I mentioned, the corn board. They have grants and have had for years that they helped fuel retailers with. We also have a new program that's just started from USDA called the H
[00:31:33.690]Roger Berry: I should have written out what that stands for. And I didn't, but it's the higher blends infrastructure incentive program. There's what that stands for. And this is $100 million national program.
[00:31:46.410]Roger Berry: Through USDA. That is just getting up and going, and it's in the application phase right now so we're hoping to get a lot of utilization of that USDA money here in Nebraska and can build out the infrastructure even greater yet.
[00:31:58.320]Roger Berry: And then we also have a LB 585 which is a bill that was approved that was passed.
[00:32:08.130]Roger Berry: Oh, I think last legislative session, but it was passed with with no funding and we do have a Avenue. Now for funding within Nebraska environmental trust that it's going to be voted on later this this
[00:32:21.690]Roger Berry: ONE IN FIRST PART OF JUNE is when that to June 11 is when that meeting takes takes place to vote on the the funding for that and we're hoping that that passes and because ethanol is certainly a very big part of our environment and fits right along with the with the job that Nebraska.
[00:32:42.630]Roger Berry: Environmental trust has according to their, their legislation.
[00:32:47.850]Roger Berry: Another big part is what what personal decisions will you make for those of you who are listening or attending here today, the personal decisions that you make, as far as your use of higher blends of ethanol or even using a tan versus using
[00:33:03.990]Roger Berry: Straight gasoline has no ethanol and it makes a huge difference.
[00:33:08.940]Roger Berry: Now I have two sub bullet points here and I use a pretty strong word in here. But like I said, I don't mince words I could have said in here, we allow people to believe the outright outright this truth that we hear all the time.
[00:33:22.740]Roger Berry: The sleight of the hand topics that people talk about. I like to call them what they are their lives. That's all they are. I get in trouble sometimes for using that word, but you know
[00:33:33.690]Roger Berry: I, it doesn't bother me to get in trouble for for simply putting the the truth to a lie out there for those who oppose ethanol for the past
[00:33:44.700]Roger Berry: 3040 years they've had a campaign out there that's based on lies and they've been doing it so long and they have so much money to do it to keep it out there all the time that people actually believe it.
[00:33:55.620]Roger Berry: I just want to assure everybody who's attending here today that it's been proven over and over and over that ethanol is not going to hurt your vehicle.
[00:34:06.690]Roger Berry: I personally have a 1999 Oldsmobile Aurora that has 380,000 or I'm sorry 280,000 miles on it that for the past five years has run on a 30 and that is not a flex fuel vehicle. It was a car that was made to run on straight gasoline actually
[00:34:26.400]Roger Berry: Premium Gasoline, it has a higher compression engine in it so it loves the octane, that is in a 30 because that's what ethanol is is octane.
[00:34:35.130]Roger Berry: So I just want to urge you as you you hear the the half truths, or what I call lies about this dig into it for yourself and look at all the millions of people who have driven billions of miles.
[00:34:48.870]Roger Berry: On ethanol in their cars and we don't have car sitting all over the side of the road dead because of ethanol.
[00:34:56.070]Roger Berry: There's also a lot of opportunities that are out there bio campuses is one thing that we would like to see start happening at our ethanol facilities, there's, there's all kinds of
[00:35:07.890]Roger Berry: Other things that can be made from ethanol. Basically anything that can be made with petroleum can be made with ethanol. So there's all kinds of opportunities that could
[00:35:15.120]Roger Berry: could partner with our, our existing ethanol plants, there's low carbon fuel standards being discussed this a Midwest low carbon fuel standard being discussed and for new producers who are attending today that's exciting for you too, because it takes into account.
[00:35:28.440]Roger Berry: And hopefully it can be set up to where it pays you for sequestering carbon in your soil. So that's really exciting. And it shows some promise.
[00:35:41.130]Roger Berry: High Efficiency automobiles. We've been working with an organization called the
[00:35:46.140]Roger Berry: AG auto ethanol working group now for several years. And it was actually have what's called a high efficiency engine. It's a high compression engine oftentimes using
[00:35:55.500]Roger Berry: Other other technologies to help bring that compression of that engine up
[00:36:01.290]Roger Berry: And what's needed there. And those is octane and ethanol provides that octane, we see that with these engines that the sweet spot is around is between 25 and 30 right around the 27th 28 is where they they work their best and run the most efficient and
[00:36:19.200]Roger Berry: This is just great technology and you don't see any fuel or any mpg lag in with these engines and
[00:36:28.650]Roger Berry: Now we just have to get convinced that this is what we need to do and get EPA moving towards that.
[00:36:35.040]Roger Berry: And these automobiles produced. I'm just going to make a quick statement here on this while we're talking about automobiles that if we don't soon.
[00:36:44.310]Roger Berry: get worked out on how do we lower the greenhouse gas emissions coming from internal combustion engines.
[00:36:50.940]Roger Berry: We are going to completely lose the liquid fuel market due to electric vehicles. Now, some say it's 30 years out, some say it's 15 years out.
[00:37:00.720]Roger Berry: But it's becoming more and more real everyday. I'm not going to sit here and try to say how long it will be before we have a lot of electric vehicles on the road.
[00:37:10.920]Roger Berry: But it will get pushed more and more if we don't from the liquid fuels part start doing more to reduce the greenhouse gases and ethanol is the way to do that.
[00:37:21.120]Roger Berry: Another technology that is out there as clear flame engine technologies. This is a new one.
[00:37:26.010]Roger Berry: That has come on and basically they're taking a diesel engine and making just a few modifications to it and running it on 100% ethanol.
[00:37:34.050]Roger Berry: And it's still getting the same torque the same efficiency. The same power out of that diesel engine and what they are on diesel fuel. So this is really exciting has a potential to use a lot of ethanol and then of course exports, as we had talked about before.
[00:37:49.260]Roger Berry: Another thing, and it says, How about personal, personal things that you can do is the 15 and I'm coming up short on time here. So I'm going to go over this real fast. But as I mentioned, he 15 is
[00:38:02.070]Roger Berry: Available at a lot of different stations. Now if you don't have it in your community, please ask your, your local retailer that to
[00:38:11.160]Roger Berry: To that you want to use the 15 and ask them to explore getting it into their station. But the main thing I want to point out here. If we went from all eternity. That's dispense today to
[00:38:24.060]Roger Berry: All he 15 let's just say we took all the 10 out but he 15 in its place, we would use another 7.1 billion gallons of ethanol nationwide. That's huge.
[00:38:34.920]Roger Berry: That equates to 2.54 billion bushels of corn. What's our carrier been the past few years, right around there, hasn't it
[00:38:44.700]Roger Berry: Wouldn't it be great to get that carry over down a lot more and start getting more for your, for your corn that you take to your ethanol plants and that you take into your local elevators.
[00:38:53.880]Roger Berry: That's one way we can do it. And I want to ask each and every one of you that's attending today, just start using more than 15
[00:39:02.130]Roger Berry: It's not going to hurt your vehicle not going to hurt it at all. And I think you'll even like it. People say, well, it decreases by miles per gallon quit thinking and miles per gallon and start thinking in terms of cost per mile. That's the way that you have to look at it.
[00:39:17.520]Roger Berry: So tomorrow, the ethanol industry works very closely with the US greens councils, as I said before, they are working very close with Brazil, Canada, India, China, Japan and Mexico. Those are the big, big ones right now that really
[00:39:30.660]Roger Berry: could import a lot of American ethanol. And as I mentioned before, even though we saw China drop off in 2018 and 19
[00:39:38.970]Roger Berry: We saw 1.55 billion gallons of US ethanol. That was exported that's 548 million bushels of corn equivalent, but the the goal by 2022 is to export 4 billion gallons, it could be done, it could be done, and hopefully it will be done.
[00:39:59.370]Roger Berry: So with that, I am going to stop and I will share my screen. Jessica, and if there's any questions, I'm more than happy to spend whatever time, we need to take care of those questions.
[00:40:13.770]Jessica Groskopf: Yeah, so go ahead and Please enter your questions into the chat box as they come up. But the question that that's lingering from your conversation is is China not importing ethanol at all, or just not importing from the United States.
[00:40:31.800]Roger Berry: Basically would be not importing from United States. They have been receiving some Brazilian ethanol.
[00:40:38.100]Roger Berry: In there, but the reason why they're not exporting from you knighted states or importing from United States is because of tariffs right now there's a see the 70 or 75% tariff.
[00:40:49.200]Roger Berry: On ethanol going into China, which just makes it to where it's too cost prohibitive.
[00:40:54.990]Roger Berry: In order to to bring American ethanol into China.
[00:40:58.620]Roger Berry: There has been some instances where it's gone in a roundabout way and gone into China American ethanol's may be gone into Saudi Arabia and then been picked up and gone into China and they can claim that with Saudi Arabia.
[00:41:10.590]Roger Berry: Ethanol, but that's been very, very little and nothing like what we would normally be exporting to China.
[00:41:19.350]Jessica Groskopf: So staying on the export route. What has happened to get to 4 billion gallons of ethanol export or what has to happen.
[00:41:28.320]Roger Berry: Right, okay. As I mentioned China is predicted to be a $2 billion market.
[00:41:34.440]Roger Berry: Mexico is predicted to be a 1 billion gallon market if we can get Mexico to go to eat in and of course, China is planning on going to eat. And so there's 3 billion of that 4 billion right there. Well, as you saw on my slide our exports for
[00:41:49.110]Roger Berry: Were over a billion gallons. So we could pick up those two countries and continue with the countries that we have, which I think it was like 69 different countries.
[00:41:57.510]Roger Berry: That were export it to to get that over a billion gallons. There's your 4 billion gallon right there. So it's very realistic very doable. We just have to get our trade going again. LOL Let me back up and Mexico has some policies that they need to get in place first to
[00:42:14.220]Jessica Groskopf: Our next question is when do you think the ethanol plants will be up and running again after the coven shut down.
[00:42:21.180]Roger Berry: Yeah, that's a really good question. If, if I could wave my wand, it would be today.
[00:42:28.530]Roger Berry: Unfortunately, I don't have that crystal ball and I don't have my magic wand.
[00:42:33.150]Roger Berry: We are steadily seeing gas usage continue to go up, week after week. And as it builds up, it, it will, of course, bring ethanol UC job which will then as ethanol usage goes up and stocks continue to decrease more plants will be able to come back online.
[00:42:53.940]Roger Berry: I wish we knew what coven 19 was going to do.
[00:42:58.500]Roger Berry: Are we going to have a second wave. We just don't know what's going to happen there. So in order to make a prediction. I just can't say on that.
[00:43:09.600]Roger Berry: I hope that maybe I have kind of under put in there, kind of underlying things of why you can't make a prediction on that. And another thing that we do have to be careful of is
[00:43:21.690]Roger Berry: It's going to take us a while to get back up to the levels that we were us. Let's say we get a vaccine.
[00:43:28.290]Roger Berry: And everybody's free to go about and do whatever they want to do again like we were prior to cope at 19
[00:43:34.860]Roger Berry: And are driving gets back up to about that same same level, it's going to take time to get there to that same level. And the last thing we want to have happen is, every plant. The United States start back up and flood the market again to where then it's a completely
[00:43:51.720]Roger Berry: Well, it's an even worse economic situation for our plants because they're producing at a loss again so
[00:43:58.800]Roger Berry: That's one thing that I know the ethanol industry is going to try to avoid it's very tough to do though, a very tough thing to do.
[00:44:05.130]Roger Berry: But I know the ethanol industry will work on trying to bring this up in a manner to where they don't hurt themselves economically and start producing too fast.
[00:44:15.900]Jessica Groskopf: Yeah. So along that those lines. What price does ethanol need to be
[00:44:21.300]Jessica Groskopf: For plants to be profitable.
[00:44:24.300]Roger Berry: There again, there's a lot of variables that go in there right now. I have heard of some profitability at the price that it's at. And it's about about $1 $15 20 I believe is is right around where ethanol is at, at the time, so
[00:44:41.460]Roger Berry: But they look rice, corn.
[00:44:44.520]Roger Berry: Corn is at a lower price. So in some situations, I've heard of some plants that aren't carrying any debt load that they can actually make a little bit of money at this at that point, but
[00:44:57.210]Roger Berry: As as the price of corn starts to go back up, which it will, and we all hope that it will for you, producers and actually for everybody.
[00:45:05.520]Roger Berry: I know ethanol plants, they have to realize that there's there's a place where everybody needs to be making money on it and and that's what the ethanol plants want to but
[00:45:16.950]Roger Berry: For the past oh three or four years prices have been running at about a
[00:45:21.990]Roger Berry: 130 or so right around in there, I believe, would that be about right, Jessica. I don't know if you track that real close, but to be right around that area.
[00:45:29.580]Roger Berry: And as you saw from my my graph there we were bouncing in and out of profitability over the last three years. So, I wish I could tell you that. Yeah, dollar 45 is where the
[00:45:42.180]Roger Berry: Where the breakeven prices, but there's just too many variables that come in there and Jessica. If you are from your economics. If you can want to expand on that a little bit more. You go right ahead.
[00:45:51.810]Jessica Groskopf: You know, without the numbers in front of me, I'd hate to do that. But we can follow up on that specific question a little bit later.
[00:45:59.400]Jessica Groskopf: Another question that's come in is there any consensus in the ethanol industry for what they would like to see happen for federal ethanol policy when the RFS sunsets in 2022
[00:46:14.280]Roger Berry: What actually happens in 2022 is that the RFS doesn't necessarily sunset. The RFS will continue on after 2022 it's just written in the original RFS law that after
[00:46:30.300]Roger Berry: The EPA then is is then in control of the Renewable Fuel Standard so I know it's kind of a misunderstanding that the diff that the RFS is going to disappear after 2022
[00:46:43.560]Roger Berry: But let's just say the RFS based upon how EPA has been handling things over the past few years. I don't want to get too political here but
[00:46:53.940]Roger Berry: How they've been handling things over the past few years, let's say after we come to 2023 and EPA says nope. We're doing away with the RFS
[00:47:02.250]Roger Berry: That is one of the reasons why we're working on on low carbon fuel standards and basically it's if you look at California has low carbon fuel standard that they have. It's been a very successful program.
[00:47:17.820]Roger Berry: California relies on ethanol for the majority of their greenhouse gas reduction in the state of California. So those are the areas that we're trying that we're working on now and trying to get more of those clean fuel standards across the nation.
[00:47:37.200]Jessica Groskopf: So another question that's come through is as a small producer, would you recommend continuing to sell my corn to the ethanol plant this year, it seems more risky than selling to the co op based on what happened this year.
[00:47:51.990]Wow, that's
[00:47:54.870]Roger Berry: I'm sorry I'm not giving very good answers here on on on some of these economics.
[00:48:02.550]Roger Berry: I guess I'm going to go back to when I was farming. I always would try to lock as much in as I felt comfortable locking in so I was guaranteed a price, whether that would be an ethanol plant.
[00:48:14.640]Roger Berry: Or whether that would be with my local, local cooperative and I know right now of getting a good price to to forward contract is is probably difficult, no matter where you go.
[00:48:28.020]Roger Berry: I think my best advice.
[00:48:33.870]Roger Berry: You're talking to a guy who went broke farm and so
[00:48:36.930]Roger Berry: Maybe I'm not the best dance that
[00:48:44.970]Roger Berry: I don't want to say to sell one or the other, because then I'm going to have one or the other. That's, that's getting mad at me for for saying that if that if that makes sense. So I'm sorry I didn't answer your question.
[00:48:57.990]Jessica Groskopf: Our next question is, could you talk a bit about another ethanol industry product corn oil will lower ethanol production hurt this market going forward. And this is a shout out to you from Dave Fulton, who is a farm farm.
[00:49:15.510]Roger Berry: Hi, Dave.
[00:49:16.800]Roger Berry: Long time no see. So yes, we've seen it. The co-products all along here as, as we've seen plants that have vital down distillers grains. We've had livestock producers who have had to make changes to the Russians.
[00:49:32.250]Roger Berry: As far as their, their protein goes and things that they're putting into their actions due to the fact that they were having trouble getting the distillers grains. So as we decrease in that production.
[00:49:44.370]Roger Berry: Of course you're going to have less corn oil coming out. And for those industries that are using that corn oil it you could see
[00:49:53.310]Roger Berry: Shortages there which, as the shortage has come along, you see higher prices we saw this with Sylar grains. But now with plants coming back on your see prices come down a little bit on those distillers grains and likewise with corn oil will do the same thing.
[00:50:10.170]Jessica Groskopf: Another question about China, how likely is it that China is able to get a 10% blend of ethanol and their gasoline.
[00:50:20.280]Roger Berry: Up until last year, they had a national
[00:50:24.060]Roger Berry: He picked, I guess you could call it that they were going to go national with the tan and then towards the end of 2019 they backed off on that, of course, they were starting to see Copa 19 at the end of 2019 in China.
[00:50:37.740]Roger Berry: And they backed off on that, but you still have some precincts within China going ahead with the 10 anyway and doing eaten.
[00:50:47.850]Roger Berry: So,
[00:50:49.650]Roger Berry: I think as the economy improves and as China starts pulling out of their downturn from
[00:50:59.130]Roger Berry: You'll see more and more precincts within China being interested in that. I mean, China has to do something. I don't know if you've been to China.
[00:51:08.070]Roger Berry: You have seen what the errors like there and they simply have got to do something in order to bring their
[00:51:14.520]Roger Berry: Their pollution levels down and ethanol is one way that they can do that without making huge changes to their, their transportations strategies to their infrastructure.
[00:51:25.170]Roger Berry: On fueling and everything that goes along the fan. So I think it's a very good chance that eaten could come in nationwide across China within the next few years, but for us to capitalize on that. We've got to get Derek rates down
[00:51:41.160]Jessica Groskopf: All right, we still have a few more minutes, we'll give you just a second to type in any final questions.
[00:51:55.980]Jessica Groskopf: Well, thank you, Roger, and thank you everyone for joining us today are recording of this webinar will be posted
[00:52:02.100]Jessica Groskopf: At farm you and l.edu where you can also register for other upcoming webinars as a reminder, check farmed out ul.edu for a schedule a more webinars in this series focused on
[00:52:16.590]Jessica Groskopf: Impact on Nebraska agriculture, we actually have two webinars next week, starting with a
[00:52:23.220]Jessica Groskopf: special partnership with Nebraska cattlemen Tuesday at 7pm tiled old risk management and livestock risk protection.
[00:52:31.440]Jessica Groskopf: Then next Thursday at noon, we'll hear from Cathy Anderson with the Nebraska Farm Service Agency.
[00:52:38.430]Jessica Groskopf: And Brad Lubin of the Department of Agricultural Economics about the coronavirus food assistance program and what it means for producers in Nebraska. So both of those are coming up next week.
[00:52:50.940]Jessica Groskopf: Furthermore, you'll be receiving a short 32nd survey in your email, and we would really appreciate your feedback on today's webinar and your input on future sessions. I don't see any more additional questions in the chat. So thank you again for joining us.
[00:53:09.000]Roger Berry: Thank you, Jessica, thank you to all who are on in attendance today.
[00:53:12.810]Thanks. Roger.

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Ethanol: Yesterday, Today and Tomorrow (May 28, 2020)

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