FEW 16: Ethanol plants seek to diversify to boost growth

US ethanol plant owners are seeking to diversify their operations to boost growth, according to Novozyme’s global marketing manager Jack Rogers.

Speaking to Biofuels International at the Fuel Ethanol Workshop (FEW) Conference in Milwaukee, US, about the US ethanol market, Rogers said: “Corn and ethanol prices have gone down in recent years but there has been an increasing demand for ethanol.

“There is still a lot of overcapacity in the industry. This has pushed down margins for producers. So they need to look at efficiency and optimisation to be successful and look for other revenue streams in addition to the ethanol itself.  The market is still moving along but the profits are not what they were a year or two years ago.

“Primarily, you have oversupply so the price of ethanol is following your primary feedstock. There is enough margin to encourage producers to keep on producing but it is not encouraging higher margins.”

According to the Renewable Fuels Association (RFA), the US ethanol industry makes an enormous contribution to the global animal feed supply.  One-third of every bushel of grain that enters the ethanol process is enhanced and returned to the feed market, most often in the form of distillers grains (DDGS), corn gluten feed and corn gluten meal.

Corn oil

Rogers said that Novozymes was now seeing ethanol plants seeking to diversify and gain revenue from by-products from the ethanol-making process, such as corn oil which is used in the feed sector or biodiesel market.

“Pricing for corn oil has been good. This has been really strong,” Rogers explained. “Corn oil has been a good source of additional revenue for ethanol producers. Underlying demand for corn oil is very strong.  A good amount of this corn oil is going to the biodiesel market and this market is not subject to saturation.”

However, Rogers said that DDGS demand in China has been weak, which has had negative impact on price for DDGS.

Elsewhere, Rogers said that Novozymes was pushing ahead with its Bioenergy University – an industry-specific online training platform for all learning styles and knowledge backgrounds.

It was launched last year and is intended to be a knowledge and learning platform for both the new entrants as well as the more experienced professionals well-versed in the intricacies of biobased fuel production.

Separately, speaking to Biofuels International at the FEW conference, Renewable Fuels Association senior vice president, Geoff Cooper, said: “The ethanol industry is a decent place today in terms of margins and demand and market structure.

“We are seeing record demand for ethanol today. We are seeing record blending demand domestically. We are also seeing strong export demand for ethanol. So, in terms of the demand picture, the industry is in great shape. Demand levels are unprecedented.

“In relation to this, we are seeing what we think is going to be record production this year. We are expecting 14.8 billion (bn) gallons to 15bn gallons of production this year.  Stocks are at pretty healthy levels.  In terms of the supply and demand balance, things are in pretty good shape. Our feedstock costs are down and corn prices are down compared to levels we saw two-to-three years ago. Our input costs are also down.

“The lower price of oil is putting pressure on ethanol prices. We are seeing lower ethanol values than what we saw in the last four-to-five years.  However, production margins are decent and they are positive. Yet, they are not at the outstanding margins that we saw two years ago in 2014 – where we had record profitability in the industry.”

Elsewhere, Cooper said that around 99% of the ethanol that is used domestically in the US is blended as E10 (10% ethanol and 90% gasoline blend).

He added: “We see a little bit of ethanol being consumed in higher level blends. We are exporting close to a 1bn gallons this year.  It is being used in those markets the same way. Primarily for use in E10 ethanol blends. Sometimes lower level blends. 

“We are hoping to see growth in two areas. The first area is in use in higher level blends – E85 and E15.

“Eventually, we like to see this used in E20 and E35 and that range. We see a tremendous growth opportunity for export volumes.”

He added that the industry saw the export market as an immediate-term opportunity for growth.

Presidential elections

Speaking to Biofuels International about the forthcoming US presidential election, Growth Energy’s CEO Emily Skor said that “no matter who is elected” it hopes that the next President is “pro-ethanol”. She also said that Growth Energy hopes that the next President ensures a free-market and competitive market place for the ethanol industry.

 “We need to move away from beltway politic s (self-serving politics),”Skor added.

This article was written by Liz Gyekye, editor at Biofuels International.