Coronavirus Limiting Travel as Ethanol Demand Destruction Continues

URBANA, IL – Extraordinary restrictions have been put in place in an attempt to slow the spread of the coronavirus in the U.S. and many other nations. The restrictions range from shelter-in-place orders to milder social distancing guidelines. The result is a contraction in economic activity unlike anything witnessed since the Great Depression. According to a recent number from the Labor Department, 3.3 million people filed for unemployment benefits last week alone, dwarfing any previous level even in recessions. According to Dr. Scott Irwin with the University of Illinois, one implication of the virus-related restrictions is that people are driving much less than before, which means that gasoline and ethanol use is declining. The impact on the price of ethanol has been swift and severe he explains. The price of ethanol at the Iowa plant level has declined 32 cents per gallon, or 26 percent, since late February. A key question for the grain markets is how much ethanol demand destruction will be caused by the ongoing economic contraction. The economist thinks, based on current trends and information, that the industry could see a total reduction of 741 million gallons this year alone.