This Week’s Headlines
Ethanol plant shuts down in Virginia as oil prices dip
HOPEWELL, Va. (Sept. 8, 2015) — The Vireol Bio Energy plant announced last week that it has suspended ethanol production for an undetermined amount of time.
The announcement comes at a time when the price of gasoline is at its lowest since 2009, and is hovering around the $2 mark.
Because of its flexibility to be blended with traditional gasoline, when gas prices fall, the price of ethanol tends to follow.
The announcement that the ethanol plant had shut down emerged from communications between the Virginia and Maryland grain producers associations which issued a joint press release:
From a grain producers perspective, this suspension of the plant’s operations comes at a really bad time, adding to already low commodity prices, this closure decreases demand for regional corn and small grains at a time when farmers are beginning to harvest this year’s crop.
“With oil prices being so low, we’ve lost our link with corn pricing. Ethanol prices have dropped significantly,” said Vireol CEO Peter McGenity. ”Compared with this time last year, they’re 35 percent less.”
The Vireol plant, which opened in Hopewell in April 2014, has been running near its capacity of 175,000 gallons per day of ethanol from grains, including Virginia and some Maryland grown corn. The plant has been a welcome player in the Virginia grain market for the past year, serving as a demand point for grains and boosting the cash grain price for Virginia growers, and supplying high quality animal protein (DDGS) to the local and export markets.
One positive note is that Scoular, the grain supplier for Vireol, will continue to operate strongly in the market and will honor all grain contracts with producers.
“Farmers can rest assured that their grain contracts with The Scoular Company will be honored, despite the recent announcement of suspension of ethanol production at the Vireol Bio Energy Plant in Hopewell,” said Matt Telg, Scoular’s manager who oversees the company’s Virginia grain operations in Hopewell, Petersburg, and Windsor. “All of the contracts that we’ve written with producers will be honored.”
Further, Scoular’s commitment to long-term expansion of its business in Virginia and the Mid-Atlantic region remains unchanged. “We’ve been in this region for nine years, focusing on providing farmers with new outlets and marketing options,” said Doug Grennan, director of Scoular’s North American container export trade. “I can assure you that these efforts will continue.”
MGPA continues to work with its counterparts in Virginia as they communicate with the leadership of Vireol Bio Energy, The Scoular Company, and the McAuliffe Administration to refute misinformation and to proactively support the production of ethanol at the Hopewell facility — an important economic resource for the East Coast.
Lynne Hoot, executive durector of MGPA, said she has suggested that MGPA work with VGPA “to set up regular meetings with Vireol in the future to see if there are any actions we can assist with to make them more cost competitive.
“As we learned from our own efforts looking into ethanol on the East Coast, it is harder to be a low cost producer with higher grain prices.
“This may present an opportunity to get winter barley approved as a second generation fuel to add value to their process. This plant is unique in its ability to use barley as well as corn and other grain.”