HANOVER COUNTY, Va. (WRIC) — As people continue to work from home and leave their cars parked in the driveway, ethanol production has declined during the coronavirus pandemic, creating a noticeable difference in profit for corn farmers.
Hanover County-based Engel Family Farms grows corn, soybeans and other crops in more than 14 counties. Production Manager Dustin Madison said that while day-to-day operations have not been impacted tremendously by the health crisis, the chain of supply and demand has seen major fluctuations.
“We made a lot less money in the last year off of the corn that we did produce,” he said. “Last year, with nobody really traveling anywhere, or not even really going to work, gas demand goes down. When gas demand goes down, ethanol production goes down.”
According to the National Corn Growers Association, roughly 30% of field corn is used for ethanol, making it the second-largest market for that crop in the United States. Although most of that corn is grown in the Corn Belt, Virginia growers are being impacted, as well.
“When nobody is asking for gas to go out, it doesn’t make sense for us to produce ethanol to supplement our normal gas,” Madison said. “That drives corn prices down.”
Virginia Farm Bureau Federation Grain Division Manager Robert Harper said that Virginia is a corn-deficit state, meaning that much of the crop is shipped in from states such as Indiana and Ohio.
“The corn comes into Virginia cheaper, so that means the people who feed corn in Virginia, when they buy corn from Virginia growers, they’ll pay less for it,” Harper said.
Ultimately, that means less money in the farmer’s pocket.
But as many drivers may have noticed at the pump lately, gas prices are going up.
“People are going to work and people are traveling a little bit more. There’s more demand,” Madison said. “As gas prices go up, ethanol is more important.”
Madison said that the corn at Engel Family Farms is unlikely to be used for ethanol production. But the increase demand for gas could still help the local farm’s profit margin.
“The corn in the Midwest, that’ll all be diverted more toward ethanol and not come to Virginia as much as it was last year for feed, which means there’s more demand all around the country,” he said. “The price all across the country will go up, as far as corn goes.”
The same is true for soybeans, another crop for which Engel Family Farms is responsible.
“Mid-year last year, there wasn’t really a lot of demand. The world was still kind of in a state of shock. Nobody knew what to do,” Madison said. “As we’ve gone through wintertime here, demand has just increased massively. The world’s kind of starting to move again, and they’re realizing that people need to eat and feed livestock, so the soybean market has just gone crazy.”
As hopeful as Madison is that grain prices will reach a sustainable level, the increased demand for gas will impact farmers, as well, who need it to power their machinery.
“It’s going to be a little rough on the back end because gas prices are going to be up,” he said. “We’ll feel that, too. But, optimistically, grain prices find a happy spot, better than they were.”
The Biden Administration is also emphasizing ethanol production, which, combined with rebounding prices and increasing travel, makes corn an preferable option to growers.
“The administration said they were going to push ethanol production higher,” Madison said. “That’s kind of where we’re headed. I think corn is going to be a lot more attractive going into the spring.”