Plummeting Fuel Demand Hits US Farms as Planting Season Begins


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ATLANTA, ILLINOIS - Under a sky of fast-moving clouds, Ron Kindred waits for a break in what has been a steady few weeks of wet weather to begin planting corn and soybeans.

The storm clouds over his Atlanta, Illinois, farm are delaying his ability to get seeds into the ground on time, adding to the mounting pressure and uncertainty he faces this year, as Kindred and farmers across the country deal with unprecedented economic headwinds brought on by the coronavirus.

"This could be the worst year we've had in a long time," Kindred said.

Last year he wondered how low soybean prices would go amid a trade war with the biggest market for them - China.

This year his biggest concern is how low corn prices will go.

"Corn has become an energy market. It follows the crude oil. It follows ethanol, and ethanol follows crude oil."

Crude oil reached historic lows in April, with trading in negative territory amid a standoff between Saudi Arabia and Russia on production amounts.

Compounding the issue is that drivers around the world are staying home amid the coronavirus outbreak, reducing demand for corn-based ethanol, which is added to fuel supplies.

In 2018, the United States exported about 1.7 billion gallons of ethanol to more than 80 countries. That amount is expected to drop this year, a troubling sign for U.S. farmers beginning a planting season in the country that produces the world's largest amount of corn, and ethanol.

While prices have rebounded slightly from historic lows, the record price drop sent a shockwave around the world that extended all the way to Kindred's rural Illinois farm.

"It's depressed our corn prices from in the $3.60s to $2.80 now," Kindred said.

According to the Renewable Fuels Association, about 70 ethanol plants in the United States are idled as a result of plummeting demand with at least 70 more reducing operations. U.S. production is down by almost 50%.

Amid weak demand, some U.S. lawmakers want controversial exemptions for oil companies required to blend ethanol in their gasoline, which could further depress prices.

"Ethanol plants purchase about a third of the U.S. corn crop," said Mike Doherty, senior economist for the Illinois Farm Bureau. "Since ethanol is blended at a 10% level for the most part, that has just been devastating to the U.S. corn market."

Doherty said it's already too late for many farmers to transition to another crop.

"How much can they really shift at this late stage in the game when they've already purchased their seed, they've already booked their fertilizer they need, the chemicals they need to grow these crops?"

"Our input costs for corn per acre are over $800," said Cambridge, Wisconsin, farmer Tina Hinchley. "Recently, the extra corn we have in our grain bins usually goes to the ethanol plant, which is 20 minutes away, but that has shut down because of the stay-at-home order and not traveling, so our bins are full."

The main product raised on Hinchley's farm is milk from her dairy cows. But she and her family also manage several hundred acres of farmland, and their full corn bins are forcing a change in plans.

"We are switching up to plant enough corn to make sure our cows have plenty of feed and maybe a little bit extra to fill our bins," Hinchley said, "but then we'll switch to the soybeans."

While Hinchley's situation illustrates how the price of one crop can affect farm management of other crops and food sources, Illinois farmer Kindred said even soybeans aren't immune to coronavirus-related price declines.

"This slowdown in the economy has also had a big impact on the volume of biodiesel that's being moved around the countryside, so our biodiesel plants are cutting back so there's less demand for soybean oil, so there's less crushing for soybean meal, so it all adds up to impacting soybeans as well," he told VOA.

The true economic impact of the coronavirus on overall farm income won't be understood immediately.

"It's added a lot of stress because we don't know how long it's going to last and how low these markets are going to go," Kindred said, adding there's little he can do to prevent the likelihood he'll lose money on whatever he grows this year, but he believes he can manage the financial hardship.

Not every farming operation can weather the economic storm.

While growing steadily over the past five years, the number of family-farm bankruptcies in the U.S. has risen 23 percent in the 12-month period that ended in March, just as the coronavirus lockdown was starting in many U.S. states.