Supply Chain Resilience:The U.S. Ethanol Industry’s

Response to COVID-19Geoff Cooper

Renewable Fuels Association

Agricultural Outlook ForumFebruary 2021

2020 Began with Great Promise• Policy/regulatory wins in late 2019

• Restoring integrity to Renewable Fuel Standard• Removing E15 barriers and infrastructure grants• Ethanol/DDGS prioritized in trade negotiations

• Ratification of US-Mexico-Canada Agreement• China “Phase 1” Agreement includes ethanol/DDGS• Biofuel tax credits extended• 10th Circuit Court decision limits RFS refiner waivers• Strong outlook for U.S. and global economic growth

COVID-19 Changed EverythingBetween March 20 and April 24:• 48% collapse in gasoline demand

• 45% drop in ethanol blending• Record ethanol stocks levels

• 47% drop in ethanol production• In mid-April:

• 75 plants completely idled• 73 plants at 50-90% nameplate capacity• 56 plants at 90%+ nameplate capacity

• Industry response to demand shock was rapid and effective

Market Response to COVID-19

148.6

77.6

0

20

40

60

80

100

120

140

160

180

Billio

n G

allo

ns (A

nnua

lized

)

U.S. Gasoline Consumption

15.9

8.7

0

2

4

6

8

10

12

14

16

18

Billio

n G

allo

ns (A

nnua

lized

)

U.S. Ethanol Production and Blending

Production Blending

Source: U.S. Energy Information Administration

Market Response to COVID-19

500

600

700

800

900

1,000

1,100

1,200

Milli

on G

allo

ns

Weekly U.S. Ethanol Ending Stocks

Source: U.S. Energy Information Administration

Recovering from COVID-19

Source: U.S. Energy Information Administration

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

Gas

olin

e C

onsu

mpt

ion

(Bill

ion

Gal

lons

Ann

ualiz

ed)

Weekly U.S. Gasoline Consumption

Avg. = 142

Low = 78

Avg. = 128

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Billio

n G

allo

ns (A

nnua

lized

)

Weekly U.S. Ethanol Production and Blending

Production Blending

Avg. = 14.2

Low = 7.9

Avg. = 12.6

Avg. = 15.8

Low = 8.2

Avg. = 14.3

COVID-19 Economic Impacts• Despite effective & disciplined response, ethanol industry losses

have been severe• 2020 gross revenue loss due to COVID-19 estimated at $4-5 billion• Combination of ~15% lower output (-2.5 BG) and lower prices

• Provisions providing emergency relief funding for ethanol were introduced in both the House and Senate, but not included in first three omnibus stimulus packages

• Latest COVID package specifies that USDA may “make payments to producers of advanced biofuel, biomass-based diesel, cellulosic biofuel, conventional biofuel, or renewable fuel…produced in the United States, for unexpected market losses as a result of COVID-19.”

We Make More than Renewable Fuel!

• 204 ethanol biorefineries in 26 states• Capacity to produce:

• 17.5 billion gallons (bg) of ethanol

• 45-50 million metric tons of animal feed

• 4-5 billion pounds of distillers oil

• 6-7 billion pounds of captured CO2

COVID-19 Response• COVID-related reduction in ethanol

output had ripple impacts:• Reduced CO2 and dry ice production• Reduced distillers grains output• Reduced distillers corn oil output

• Resiliency and creativity:• Emphasis on co-product yields• Significant increase in high-purity

alcohol production for hand sanitizers and disinfectants

• Increased focus on CO2 capture0

50,000

100,000

150,000

200,000

250,000

300,000

Tons

CO

2

CO2 Capture by Ethanol Plants

2019 3-YR AVG (2017-2019) 2020

$0

$10

$20

$30

$40

$50

$60

$70

0%

200%

400%

600%

800%

1000%

1200%

1400%

1600%

5-Jan-20 5-Feb-20 5-Mar-20 5-Apr-20 5-May-20 5-Jun-20 5-Jul-20 5-Aug-20 5-Sep-20

Weekly $ Sales (M

M)

YoY

% C

hang

e

Dollar Sales YoY % Change

Panic Buying

Out of Stocks

Supply Chain recovery and high need

Hand Sanitizer Category: 2020 YTD Dollar Sales TrendInitial spike in sales caused increased out of stocks in March resulting in a decline in distribution. Once supply chain recovered, consistent elevated levels of sales starting April continued on to end of modeling period

Weekly % Chg vs YAG

6% 5% 3% 28% 110% 83% 69% 62% 385

%479%

256%

204%

148%

266%

395%

640%

986%

995%

1284%

1369%

1332%

1232%

1178%

1109%

1173%

1099%

1148%

982%

844%

679%

529%

470%

508%

538%

538%

573%

Source: Information Resources Inc. (IRI)Actual data through 10/4/2020.

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

Jul-1

8

Aug-

18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr-1

9

May

-19

Jun-

19

Jul-1

9

Aug-

19

Sep-

19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb-

20

Mar

-20

Apr-2

0

May

-20

Jun-

20

Jul-2

0

Aug-

20

Sep-

20

Oct

-20

Nov

-20

Thou

sand

Bus

hels

Monthly U.S. Grain Use for Industrial Alcohol Production

Source: U.S. Dept. of Agriculture

U.S. Ethanol Demand Recovery

14.5 14.4 14.6

12.7

13.914.5

1.3 1.7 1.3

1.1

1.3

1.6

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

2017 2018 2019 2020 2021P 2022P

Billio

n G

allo

ns

U.S. Ethanol DemandUS Consumption Net Exports

16.1 15.9

13.8

15.3

16.115.8

Source: RFA calculations based on data and projections from U.S. Energy Information Administration, U.S. Census Bureau, and U.S. Department of Commerce; totals may not add due to rounding

Demand for U.S. ethanol unlikely to recover to peak pre-COVID levels until at least 2022.

Record