Flooding bottles up US ethanol

Floodwaters in the US midcontinent have bottled up the country's largest ethanol producing region, trimming production as plants wait for railroad repairs.

Devastating flooding in a key corridor along the Nebraska and Iowa border over the past week shut down rail routes and forced some ethanol plants to curtail production. The transportation outage has left some fuel blenders considering alternate sources of octane despite record US ethanol stockpiles.

"There is no doubt that production and transportation is being affected," Iowa Renewable Fuels Association executive director Monte Shaw said.

An intense weather system last week dropped snow and then heavy rain through the northern plains, flooding the Missouri river along the Iowa, Nebraska and Missouri borders. River levels reached two feet above moderate flood stages in Omaha, Nebraska, on 17 March, and approached 30 feet, or within two feet of record levels, at St Joseph, Missouri, according to the National Weather Service.

Waters submerged or washed out miles of BNSF and Union Pacific track. Both railroads embargoed movements to certain destinations beginning late last week in Iowa, Nebraska and Missouri as routes became impassable. The number of BNSF ethanol rail cars that have not moved in at least 48 hours soared last week to more than 860 cars, according to the Surface Transportation Board — almost ten times the number of idle cars for the same week last year. The railroad reported routes connecting into Sioux City, Iowa, and to Omaha and Lincoln, Nebraska, as out of service as of yesterday. Union Pacific, which had fewer than 100 ethanol cars not moving for more than 48 hours over the same period, reported rail lines out of service in eastern Nebraska and as under observation between Illinois and Kansas across Missouri.

Flood warnings remain in place into next week for southwest Iowa and eastern Nebraska. The states combine for 40pc of installed US ethanol capacity.

Nebraska plants had not suffered flood damage, state ethanol board chairman Jan tenBensel told Argus. But the logistical constraint had cut production as plants deal with slower shipments to market, and raised concerns about delivering grain to some facilities.

"Most of the plants are going right now at a reduced pace, just waiting for the railroad to get cars to them," tenBensel said.

Flint Hills Resources confirmed reduced rates at its ethanol plants in the affected area to manage slower rail movements south.

"We continue to operate, even though shipping is a challenge," spokesman Michael Wilhelmi said.

The company separately confirmed disruptions to deliveries into Texas.

"Flint Hills Resources is adjusting our gasoline production to make up for the loss of ethanol to meet demand," the company said.

Ethanol last year accounted for more than 10pc of the US gasoline supply, and offers a critical cheap source of oxygenate and octane for finished fuel. Fuel blenders without ethanol would turn to blending premium blendstocks into lower-octane unfinished gasoline, raising potential isolated shortages for premium gasoline.

Texas trade associations confirmed they were not yet seeking state support for federal fuel specification waivers. The Environmental Protection Agency did not comment on whether it received any requests for help from other states.

Magellan Midstream Partners and Kinder Morgan were both monitoring supplies but reported adequate inventories for customers.