Flooding Slows Iowa Biofuels Production

Continued flooding could take over 400 million gallons offline.

Published on: Jun 16, 2008

An estimated 300 million gallons of Iowa's 2.2 billion gallon ethanol production is currently offline due to flood conditions in the state, the Iowa Renewable Fuels Association reported. If predictions of river cresting into early this week prove correct that number could grow to over 400 million gallons. "Even as the rivers receded, based upon the reports we've received, it could likely be some time before production can return to normal levels," IRFA said. Ethanol plant shutdowns have reduced corn demand by more than 300,000 bushels per day.

No ethanol or biodiesel refinery has reported a disruption of feedstock supply that will impact operations. Several livestock processors, who supply animal fats for biodiesel production, have shut down. "While there has been no impact on feedstock supply yet, this situation will be monitored," IRFA said. Operating plants are reporting a significant spike in orders for distillers grains. It is likely that interstate shipping disruptions of feed products combined with some corn processing plant closings in Iowa has increased the Iowa demand for distillers grains.

Given the inherent flexibility of biofuels distribution (rail, truck, barge), no plants have reported an inability to ship fuel to destination markets. However, railroad operations have been greatly impacted by the flooding. Delays are widespread. At least one bridge has collapsed on a rail line that services several ethanol plants. Also, many highways and I-80 have been/will be closed. These are serious challenges and will impact shipping routes and duration. "At this time, however, we do not expect any significant supply disruption to end markets," IRFA stated.

Perhaps the biggest impact on biofuels producers from the floods has been the dramatic escalation in commodity prices, with corn futures surging nearly $1 in the past week, IRFA said. "As under-regulated hedge funds speculatively drive prices upwards, the impact is felt by biofuels producers, livestock farmers, and many other sectors."

Source: Feedstuffs