By Scott Irwin, Department of Agricultural and Consumer Economics, University of Illinois
The U.S. ethanol industry faced considerable headwinds in 2018, including the lowest prices over the last decade, policy setbacks in the implementation of the RFS, and political resistance to granting a year-round RVP waiver for E15. The impact of these headwinds on ethanol production profits is certainly of interest to those in the ethanol industry, as well as policymakers and legislators interested in the financial health of the U.S. renewable fuels industry.
A model of a representative Iowa ethanol plant was used to track the profitability of ethanol production. The model is meant to be representative of an “average” ethanol plant constructed in the last decade. There is certainly substantial variation in capacity and production efficiency across the industry and this should be kept in mind when viewing profit estimates from the model.
Ethanol prices started 2018 at historically low levels of $1.25 per gallon, rose to a peak of $1.43 in April, and then fell most of the rest of the year, reaching a low of $1.06 in late November.… Continue reading