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Ethanol market facing strong headwinds

A University of Missouri ag economist says ethanol has had a strong year so far, but challenges are ahead.

Ben Brown with the MU Food and Agricultural Policy Research Institute tells Brownfield the first challenge is sharply higher gas prices as we enter the summer driving season.

“Prices are about $1.30 higher this summer than they were last year at this time, or 43 percent higher, and that could deter people’s interest in getting out and traveling,” he said.

He said high inflation is eating into incomes and also limiting travel interest.

Brown said there are also lingering production and consumption concerns because of supply chain struggles.

“We’ve seen challenges with our ethanol facilities getting rail cars in whether that’s bringing corn to the facility or whether that’s taking ethanol away from the facilities to some of those coastal markets like California and New York,” Brown said.

And he said oil refiners have a huge incentive to turn crude oil into heating oil or distillate fuel rather than gasoline which could mean less gasoline becomes available for ethanol to be blended into and further raise gas prices.

“I don’t know if I see softer gas prices coming, and maybe some higher gas prices in the next few months; which would then decrease the amount of ethanol consumed,” Brown said.

Brown made his comments during the recent Weekly Commodity Market Update.