CASSELTON, N.D. -- Almost half the corn-fed fuel ethanol plants in the United States shut down due to reduced demand because of the COVID-19 pandemic.
National ethanol production the week of April 6 was 672,000 barrels a day, down from full capacity of 1.1 million barrels a day, according to the U.S. Energy Information Administration, but North Dakota’s largest plant will continue.
Ryan Thorpe is chief operating officer of Tharaldson Ethanol west of Casselton in eastern North Dakota, agreed to be interviewed about the unfolding crisis outside his offices on Wednesday, April 8, as the public is excluded from coming inside due to the pandemic.
Ethanol prices are at all-time historic lows, Thorpe said, with the closest comparison in 2005 when corn prices were $2 per bushel. “Back then the lowest price ever traded for ethanol futures was $1.16 a gallon,” Thorpe said. “We’re currently trading around 80 cents a gallon.”
Tharaldson is the sixth largest ethanol plant in the country. Four that are larger are operated by ADM and one is operated by Cargill. “We do anticipate -- just looking at the gas demand -- we did have a large build in our stocks this week. This is the lowest demand in modern history."
Biofuels giant POET of Sioux Falls, S.D., on April 7 -- the largest ethanol producer in the world -- announced they’d close three plants and delay starting up an Indiana plant, furloughing 130 employees. One of those plants is at Chancellor, S.D., a 125-million-gallon per year plant. They also shut two plants at Ashton and Coon Rapids, Iowa, of 60 million and 65 million gallons, respectively.
Tharaldson Ethanol at Casselton, N.D., is grinding ahead at roughly its typical pace, running in the red but losing less money by running. “If we can be a survivor here, continue running, we can be stronger coming out of this,” he said.
They remain fully staffed with 57 employees and plan to continue that, although they’ve been approved for a loan/grant program for small businesses through the Small Business Administration.
Typically the plant would be running about 500,000 gallons a day. It’s an annual rate of about 175 million gallon.. The company is not running quite at full capacity, but at a “pretty high rate,” he said.
Tharaldson Ethanol is following through on all of their corn delivery contracts. They were opened for corn deliveries only Monday and Tuesday, but for the rest of the week, were only loading out trucks of distillers grains for livestock feed and ethanol.
Thorpe said the company would continue to honor all of its contracts and would continue to receive corn like they have for the past 13 years. The company is able to process lighter test weight corn, so their discounts are much less than typical elevator quotes. “Our basis has softened here recently, in the last couple of weeks, but we’re still very competitive -- typically the best game in town.”
“We run much more efficiently when we’re producing more gallons,” Thorpe said. “Our economies of scale. We have looked at slowing the plant more. We’ll make those decisions on a weekly, even daily basis.”
Tharaldson Ethanol has seen an increase in demand for its distillers grains, which is in part due to actual or feared shortages for producers. During the interview on April 8, a semi-trailer from Parker, S.D. -- 270 miles away -- was picking up distillers grains, despite being only about 9 miles from the POET ethanol plant at Chamberlain, S.D.
“We have been a very reliable supplier for the livestock industry in general over the last 10 to 15 years,” Thorpe said, noting the company has been serving existing customers and some new customers as well. “Yes, we have seen prices rise up here (for dried distillers grains) with these plants shutting down. There are guys out looking for substitutions but that’s very hard to find,” he said.
North Dakota has six ethanol plants, including one new one in Grand Forks. “We have seen a number of North Dakota plants have slowed down or shut down,” he said.
A bigger hit
As big as the ethanol deal is, it is only about 10% of the action for Gary Tharaldson, the nation’s largest hotel developer. Tharaldson started buying motels in 1982. From 1982 to 2005 he built two hotel empires.
With proceeds from selling hotels, in 2008 he opened the $280 million Tharaldson Ethanol plant, which produced its one-billionth gallon of ethanol -- an achievement marked in April 2017. According to the newly-published book, “Innovative Entrepreneurs of North Dakota and Northwest Minnesota: 150 Years of Impact!” Tharaldson tells the authors he had a net worth of $1.66 billion in 2006 but that dropped to $868 million in 2011, in the last recession.
For the past eight years, Tharaldson Ethanol has had a distilled spirits permit to sell 200 proof undenatured alcohol to distilleries that are -- on a temporary basis -- making hand sanitizer. “They’re buying the straight, 200-proof alcohol from us, running it through their distillery and making it into hand sanitizer,” he said. “They’re picking up some additional business when they don’t have customers in their establishments.”
Thorpe said a small brewery or distillery might take 500 gallons a day, while the plant makes 500,000 gallons a day. “We have more than enough to go around, but every little bit helps. We’re just happy to be part of the solution as well, that we can offer a product the market needs right to get past this pandemic.”
Thorpe said he hopes the country can get through the pandemic in the “near future.”
“Time will tell,” he said.