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Ethanol industry better prepared for this downturn

ethanol plant-andersons-denison iowaIn recent days, several national media outlets—including the Wall Street Journal and ABC News—have reported on the negative impact that falling oil prices are having on the ethanol industry.

But Todd Sneller, administrator of the Nebraska Ethanol Board, says the situation is not as dire as some are reporting.  Sneller says while profitability has fallen, most plants are still operating in the black–and he says the ethanol industry is in a much better position now than during previous financial downturns in 2008 and 2012.

“As painful as some of those past periods were, it’s really I think proven to be a blessing in disguise on an ongoing basis—in that those companies that have managed to weather the storm a couple of times are, in most cases, very astute operators,” Sneller says.

“In most cases, they’ve rapidly amortized—or completely amortized—the debt that they’ve had during periods of high profitability. And I think that puts them in a much stronger position today to face many of the challenges they’re currently facing.”

Sneller says the drop in ethanol prices has been partially offset by strong demand for co-products like distillers grains and corn oil.

“They’re certainly painfully aware of the fact that there’s been a rapid drop-off in the value of ethanol,” he says, “but they’re also seeing a bit of a balancing with profitability coming from these other products out of the ethanol plant. So that’s a bit of a hedge in terms of managing profitability.”

Sneller says ethanol’s important role as an octane enhancer and its use in oxygenated fuels helps bolster demand for the product.

AUDIO: Todd Sneller

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