Ethanol co-op determined to keep going despite drop in fuel demand

WATERTOWN, S.D. — Ethanol producers in the Dakotas and Minnesota are making different decisions about staying open in the face of the swift, sharp drop in fuel demand during the COVID-19 pandemic.

The Renewable Fuels Association said in an April 20 report that ethanol sales could decline by $10 billion from the $23 billion that had been expected for 2020. Ethanol production was at record lows for the first half of April. “Weekly consumption has already fallen by nearly 50% compared to the same time in 2019,” the report said.

Glacial Lakes Ethanol LLC, based in Watertown, S.D., with its four ethanol plants and 1 million gallons of daily production in South Dakota, is part of the half of the industry still open for business.

Jim Seurer, GLE’s chief executive officer, speaking to Agweek on April 16, said his board of directors had made hard choices but has decided to keep all of its four plants open, but acknowledged it is affected by some others shutting down.

The four GLE plants have a total capacity of about 350 million gallons per year. Annual capacity by plant in gallons per year are Watertown, 130 million; Mina, 140 million; Aberdeen, 50 million; and Huron, 30 million. Seurer said the production had “dialed back” to 80% to 90% production.

Meanwhile, about 90 miles to the north, Hankinson Renewable Energy (Guardian Hankinson LLC) at Hankinson, N.D., had gone into a full shut-down in the first week of April with its 149-million gallon per year plant.

Jeanne McCaherty, chief executive officer of Guardian Energy at Prior Lake, Minn., said the Hankinson plant and Guardian Energy Janesville, Minn., both were shut down in the first week of April — each with 150 million gallons of annual production.

“We’ve told our farmers we won’t be able to accept corn until at least June 1, is what our target is,” McCaherty said.

The U.S. Energy Information Administration weekly report from April 15 was that the nation was running at 570,000 barrels a day (42 gallons per barrel), down from 672,000 barrels on April 8. That’s compared to 1.12 million barrels the same time a year earlier. Also, the EIA reported 23 million barrels of stocks in 2019, while stocks on April 15 had climbed to 27.5 million barrels.

Glacial Lakes Energy was formed in 2001 as a subsidiary of Glacial Lakes Corn Processors, a cooperative of about 4,000 members and the co-op decided to keep grinding corn.

“We’ve got commitments to keep,” Seuer said. “We’ve done a pretty extensive assessment of all of the different options.” He says the co-op is “still bullish on ethanol” in the long-run, despite the decline in motor fuel demand, including the ethanol mixture as an octane enhancer.

Seurer said the commitments include for distillers dried grains being shipped out — typically to 150 to 200 livestock producers in the area who use the ethanol byproduct to feed livestock. Ethanol is being shipped out and corn contracts are going ahead with farmers.

“Farmers are depending on us,” he says, noting that many take the higher-moisture “modified” distillers grains to area dairies and other livestock feeding enterprises. He says there are other commitments to natural gas companies and rail car companies.

“It’s a dilemma,” he said, of the choices. “We looked at this every which way we know, and the answer comes up the same.”