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Iowa Ethanol Demand Rebound   01/25 17:23

   With Strong Industry Margins, Iowa Ethanol Industry Looks for E15 While 
Pushing Back on EVs

   While ethanol producers are seeing strong recent margins, the Iowa Renewable 
Fuels Association held its Fuels Summit on Tuesday with some criticism leveled 
toward federal biofuels policy and the growing attention being drawn to 
electric vehicles.

Chris Clayton
DTN Ag Policy Editor

   DES MOINES (DTN) -- Ethanol producers in Iowa are coming off one of the 
strongest quarters of production and profitability in history as demand in the 
latter part of 2021 was better than anticipated, even with higher corn prices.

   Typically, the winter months are slower, but ethanol prices have been higher 
to overcome strong corn prices. Ethanol producers were somewhat caught 
off-guard by the demand they saw for fuel toward the end of the year.

   "As part of the ethanol industry right now, we're seeing a really attractive 
margin environment," said Mike Jerke, president and CEO of Southwest Iowa 
Renewable Energy near Council Bluffs, Iowa. "It's good, and in our business, if 
you can get through the winter months, the seasonality is such where you are 
just trying to hold things together, and quite frankly, we're doing much better 
than just holding things together right now."

   POSITIVE SIGNS

   Moving into the next quarter, signs remain positive.

   "At the end of the day, we're a commodity business. The whole industry will 
respond to positive margins by producing more. That will also have the effect 
of bringing those margins back. It will be interesting to see as we move into 
spring and the driving season, the buildup and if we are able to maintain the 
momentum."

    

   Dave Sovereign, board president for Golden Grain LLC in Mason City, said 
margins currently remain good, but not quite what they were during the last 
four months of 2022.

   "Historically, they are at record levels, or at least at the high side of 
the trends," Sovereign said.

   Sovereign and others said the ethanol industry also was able to benefit from 
some supply chain logistics. Slower train performance in some areas of the 
country led to higher demand needs for ethanol.

   "That's adding to the demand right now," Sovereign said. He added the 
industry has rebounded dramatically from the pandemic in 2020. "Especially this 
fourth quarter. Nobody saw that coming. You couldn't have planned for that type 
of dynamic coming together. That quarter was the best in the history of Golden 
Grain," which began producing ethanol in 2004.

   Golden Grain now is "battening down the hatches" and remaining conservative 
to lock in production. In 2021, Golden Grain also built the world's largest 
grain bin, with 2.2 million bushels of capacity, which has allowed the ethanol 
plant to store more grain and continue producing ethanol during longer holiday 
weekends and weather storms as well.

   "It gave us the opportunity to weather through some of the longer weekends," 
Sovereign said.

   CRITICISM ON FEDERAL POLICY

   While ethanol producers are seeing strong recent margins, the Iowa Renewable 
Fuels Association during its Fuels Summit on Tuesday leveled some criticism 
toward federal biofuels policy and the growing attention being drawn to 
electric vehicles.

   Looking at 2021, Iowa ethanol plants produced a record 4.4 billion gallons 
-- topping the previous record in 2018 -- and accounting for about 29% of 
national ethanol production. Iowa RFA calculates that biofuels overall 
contributed $5.2 billion to Iowa's economy, including $2.65 billion in direct 
income, much of that tied to farm income.

   Monte Shaw, executive director of the Iowa RFA, challenged comments by 
President Joe Biden and EPA Administrator Michael Regan who have championed 
biofuels in different ways. EPA's proposals for the Renewable Fuel Standard for 
2022 is "great," but 2021 volume proposals are disappointing, and the 2020 
levels reopen the final rule and reduce the actual volumes of biofuels blended. 
Shaw then noted the repeated moves by the Biden administration to champion 
electric vehicles during the past year.

   The EPA proposal calls for retroactive cuts to the corn-ethanol portion of 
RFS volumes below 15 billion gallons at 12.5 billion for 2020 and sets the 
level at 13.32 billion for 2021. The agency would then increase corn-ethanol 
volumes to 15 billion gallons in 2022.

   TERRIBLE AND UNNECESSARY PRECEDENT

   Devin Mogler, senior vice president of government affairs and sustainability 
for Green Plains Energy and president of Iowa RFA, said of EPA reopening the 
2020 rule, "Not only was it a terrible precedent, but it was unnecessary."

   Shaw pointed to another move by EPA in December to announce vehicle mileage 
standards in which Regan said the agency's goals were "paving the way toward an 
all-electric, zero-emissions transportation future."

   Shaw pushed back on the moves, arguing EPA is ignoring the one federal law 
on the books meant to reduce greenhouse emissions from vehicles, saying 
"Biofuels can make a meaningful impact this decade" in lowering emissions.

   "There is no magic switch that is going to make all of our vehicles 
electric," Shaw said. "We're going to need biofuels." He added, "The reality is 
EVs can't keep up with the wishful thinking of DC politicians."

   While the Iowa biofuels industry leveled its criticisms of EVs, moves and 
investment to electrify the auto industry continue. General Motors on Tuesday 
also announced nearly $7 billion investments in four Michigan plants to develop 
electric batteries and build electric pickups, marking the largest-single 
investment in the company's history and creating 4,000 jobs in the process. The 
GM announcement was praised by President Biden, who said auto manufacturers are 
increasingly embracing investments in electric vehicles.

   "This announcement is just the latest in over $100 billion of investment 
this past year in American auto manufacturing to build electric vehicles and 
batteries," Biden said.

   Iowa Gov. Kim Reynolds, a Republican, told the biofuels industry the state 
will continue defending the investment and infrastructure made in Iowa for 
biofuels against policy attacks at EPA, whether that involves small-refinery 
exemptions under the Trump administration, or shifting the 2020 blend volumes 
under Biden.

   CONTINUING THE FIGHT

   "We have to fight, and that is exactly what we're going to continue to do," 
Reynolds said. "Time and again, EPA under both parties has walked away from its 
commitment to renewable fuels, and we've had to bring it back."

   Rather than rely on EPA to reissue rules for year-round E15, Reynolds 
reintroduced a bill to the Iowa Legislature on Monday that would require 
retailers to include E15 pumps in any installation of replacement of fuel 
storage tanks or pumps by 2026. The bill also expands the state's E15 promotion 
tax credit from 3 cents per gallon to 9 cents per gallon year-round through 
2025. The bill sets standards and incentives for retailers to offer 20% 
biodiesel blends and E85 blends as well.

   "Iowans want access to less-intensive, cleaner-burning fuels that's grown 
and made right here at home," Reynold said.

   Shaw also said a broader group of Midwest states are moving legislation or 
rules to create year-round statewide E15 in their states. He pointed to a 
bipartisan letter from eight governors from Illinois, Iowa, Kansas, Nebraska, 
Minnesota, Missouri, North Dakota, South Dakota and Wisconsin. Governors of the 
states wrote EPA in November asking for details on how they could each move in 
that direction. 

   Reynolds also criticized the Biden administration's focus to champion 
electric vehicles. Reynolds said the administration is "concentrating all of 
its efforts to actively eliminate gas-powered cars. And that's a mistake, 
especially as China looks to lock up precious metals that make the EV 
batteries."

   Chris Clayton can be reached at Chris.Clayton@dtn.com

   Follow him on Twitter @ChrisClaytonDTN




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