Don’t Bail out Ethanol

In recent weeks, there have been calls from ethanol producers to extend the authorities used by the U.S. Department of Agriculture’s Commodity Credit Corporation (CCC) to provide a bailout to their industry to compensate for losses due to the pandemic. Their call has been echoed by members of Congress from key corn producing states. While the industry has suffered losses, a bailout is a bad idea. Losses are far less than claimed and extending payments under the CCC would set an even worse precedent.

Like other manufacturers, the ethanol industry has been hard hit by the pandemic. Lockdown and quarantine policies have meant less car travel, resulting in significant drops in motor fuel consumption. The Energy Information Administration forecasts that motor fuel production will decline by almost 15 billion gallons in 2020 compared to year-ago levels. Less fuel consumed means less ethanol, which is blended with gasoline and accounts for about 10 percent of gasoline supply. Total ethanol production is forecast to decline by 1.7 billion gallons in 2020.

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