According to a June report in the Wall Street Journal, “Ethanol demand is topping out. The amount used in gasoline is near federal mandates, and gasoline consumption is declining. After 15 straight years of growth, ethanol production this year will fall slightly and will be roughly flat next year, according to the U.S. Energy Information Administration’s May forecast.”

On top of it, just a few days ago, the Renewable Fuels Assn. (RFA) issued a press release aimed at refuting rumors that the EPA was going to waive down the Renewable Fuel Standard (RFS) by 20%, presumably based on concerns about the U.S. corn crop.

There’s little doubt that corn-based ethanol is on the political and economic firing line these days, which means farm equipment sales could see slower growth in the year ahead. Many industry observers attribute much of the sales momentum of ag machinery in the past five years directly to the increased production of corn for ethanol.

In a July 2 note, Ann Duignan, machinery analyst for JP Morgan, said given high inventories and elevated corn prices, ethanol producer margins were negative in June, despite low natural-gas prices and elevated prices for DDGS.

“We estimated a -1.9% margin per bushel of dry-milled corn in mid-June, the lowest since 2008. As a result, numerous producers have been temporarily or permanently shutting down capacity over the last few months, as ethanol makers await better economic conditions. That said, the approval of an E15 labeling system in June represents another step toward commercial availability, and we believe blenders will utilize the option to blend up to 15% ethanol given its current profitability, which we estimate to be approximately $0.08 per gallon.”

But Duignan also notes “several barriers to implementation.” As a result, she says, E15 will be a longer-term driver of corn usage.

Describing the recent pressures faced by ethanol producers, the RFA said in a statement, “Ultimately, the market will sort out any imbalances in supply and demand. Much like the petroleum industry, ethanol producers will read market signals and make decisions accordingly.”