Ethanol producers were already dealing with building inventories, lower blending rates and cheaper crude oil (U.S. crude production was up 17 percent in 2018). Now the recent flooding has impacted 10-15 percent of ethanol production in Nebraska, Iowa and South Dakota. The biggest impact has been from the shutdown of rail lines that deliver corn and ship out ethanol production. Feedstock use is dropping further while ethanol inventories are building, depressing local hub prices. The lack of deliveries is driving up retail fuel prices, especially on the West Coast.

The bottleneck in the ethanol value chain comes as production was already slowing due to broader market and policy factors. Corn use by ethanol mills dropped 4 percent in Janua...