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Senior Contributor

Rabobank view of the future

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Senior Contributor

Re: E-Plants Up Marketing Game

   Today must be misinformation day on ethanol.  Mike if you paid 4.00 for gas, its because of high petroleum prices. RBOB gas 3.27 is 90% of your price. Ethanol at 2.24 is 10% of your price.  When VETEC ended in Dec the petroleum blender stopped getting the 45 cent blender credit, which raised your price at the pump 5 cents. That has never gone to the ethanol plants. Last federal subsidy to build an ethanol plant was in 2005. Vetec demise in Dec. removed the tariffs on incoming ethanol. Brazil in Dec lowered its ethanol content in their fuel from 25 to 20%. This was done because in the last two years with sugar prices over the 20 cent a pound range they CANNOT COMPETE with CORN ethanol and were importing CORN ETHANOL into Brazil because it is CHEAPER than  sugar ethanol. So in Dec our corn ethanol exports slowed.  These will return as Brazils sugar industry is having trouble keeping pace with the 20% content and a booming Brazil economy. Sugar needs to drop 8 cents to make Sugar ethanol competitive. As for 2008 ethanol plants that were building or expanding  and with corn in the 6.00 range were caught in the down turn of the economy, with high costs on their balance sheets and lowered values for their asset. Banks shut down their loans and plants were left to struggle on cashflow. They weren't the dumb environmentalist and they aren't doing things much different as far as buying and hedging activities.

     If you are mad at HIGH gas prices blame the Petroleum Industry. Want to lower your gas price ask for 15% Ethanol. Find a blender pump and fill up with E-30 get 96 octane. Ethanol cleans the exhaust emissions, burning up the carcinogens.

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Veteran Contributor

Re: E-Plants Up Marketing Game

it is so hilarious how one particular/peculiar contributor to this site is so determined to talk corn prices down, that they will go to all kinds of lengths of offering misleading opinions/data.......all the while pointing the finger at nearly everyone else whom bucks his views and claiming they to be the one's distorting the consensus view of these issues surrounding the corn market? not too mention said contributor has made remarks that corn would have a $3 in front of it's price by now or sometime soon, which flies in the face of reality seeing as how old crop corn just took out it's Jan highs

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Frequent Contributor

Re: E-Plants Up Marketing Game

"it is so hilarious how one particular/peculiar contributor " =  VRBuck................?

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Contributor

Re: E-Plants Up Marketing Game

Just remember why Brazil started to import ethanol in the first place, thats because of the high price of sugar and it was more profitable to produce sugar rather than ethanol. While every thing may change the price of sugar is still high and currently its still in a uptrend. Also I read that alot of the cane fields are mature and produce less output and it takes some time to ramp up production. So while Sugar produces ethanol better it may not come on line as fast as some think.

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Senior Advisor

Re: E-Plants Up Marketing Game

If ethanol plants are buying corn cheap at seasonal lows, where are they storing it?  Not on my farm.  I dont' think they have the bins.

 

It looks like ethanol is going to be volatile as market and political forces can move it pretty readily.

 

Saying that ethanol use exceeds feed  use is still ignoring the use of DDG for feed.  Looked at that way, feed is still the biggest user.

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Veteran Advisor

Mike...those were interesting comments

from that grain analyst.....but not sure I agree with a whole lot of it...

 

first off, the concept of a "harvest low" has kind of been turned on it's ear since carryouts have shrunk under 10% of annual usage...

 

that harvest low idea was a lot more predicatable, and possible, when we were dealing with 15-20% carryouts...

 

when he says they "buy the harvest low", I assume he is talking about buying futures......one of the issues in the ethanol business is that you can rarely, if ever, buy corn futures and lock in margins 4-6-8 months out.......so if you are buying corn futures, it's "on a spec", and I do not think all that many ethanol plants have the financial capacity to play that game.....after the 2008 debacle, the financial insitutions tightened the screws on just how much "flat price risk" these ethanol plants could take.....and in reality, it's not very much---just a few ticks of annualized production......if you are buying cash corn in excess of what you can lock in margins for by selling ethanol and ddg's, you are likely hedging the corn to manage that risk.....or backing your bid off to not buy corn if lacking the capacity to hedge the corn...

 

I don't think Amaizing Energy sold to Anderson's because they made so much money they decided to just call it a day!

 

Keep up the good reporting work...

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Veteran Advisor

Re: E-Plants Up Marketing Game

teaspoon73,

 

I wasn't attaching higher gasoline prices and ethanol. I was making two separate points. One, paying $4 gasoline prices is painful. Two, my separate point is that ethanol prices will be well supported, as long as crude oil and gasoline prices are high.

 

On Brazil, you and I agree. The story behind the story is that Brazil's sugarcane production has been hurt, due to a few years of poor crops. The new sugarcane acres will take 3-4 years to produce a crop. Thus, Brazil will need to find ethanol somewhere to fill in the gap.

 

Mike

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Re: E-Plants Up Marketing Game

Ethanol demand is inelastic to price because of the blend wall.  High gasoline prices actually hurt ethanol demand because of lower gasoline demand.  Gasoline demand was down 7% in January and February, so was ethanol demand.   

 

As far as Brazil, that is a market story that is bullish fuel.  Will it be enough to offset the decrease fuel demand in the US?  Probably not. 

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Senior Contributor

Re: E-Plants Up Marketing Game

  Actually Mike you posted alot of jibberish from some analyst that knows squat about the biofuels industry.

  Here is a fact for ya , zero corn deliveries for March corn.

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