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Senior Advisor

Ethanol........

can someone weigh in on this with some real numbers............real numbers on established core industry plants..................over on the other site a lot of talk that some e-plants are in red on margins, however it appears to be start ups..........now vr is over here saying the same thing, course he has been on this kick that ethanol dies on January 1..........so its not surprising he is protecting the bearish stance............

 

trying to figure out why............a lot of 4, 5, and 6 corn going in with elevated oil prices.........is ethanol spot price that depressed???

 

Ray, any thoughts???????

 

EDIT:  figure I found this AM is that ethanol is around $2.50 average???couple that with DDG income I would think plants could handle a $6plus average on corn, I would guess they are not at $6plus average yet???

 

 

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Senior Advisor

Re: Ethanol........

It may depend on what the definition of "is" is.  This CARD ISU chart shows that ethanol plants are projected to make a little less than enough to cover their cost of capitol.  So, just like farmers that own their own land, a paid up plant would be in good shap.  Look at the graph.

http://www.card.iastate.edu/research/bio/tools/proj_eth_gm.aspx

 

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Senior Contributor

Re: Ethanol........

I have read that ethanol prices have now rolled over to 2012, and the price now is considerably less than it was before the rollover.  Just a few weeks ago, margins were supposedly around 70-95 cents per gallon.  Now, I've read margins while still positive are around 5-10 cents per gallon because of the rollover prices.  I don't fully understand it all, but this is what I've read.

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Senior Advisor

Re: Ethanol........

Husker,

Well, this is the question of what "is" is.  Some say that the margin is over cost which means there is a profit, while others say the margin doesn't cover cost of capitol so it is a loss.  We need someone to give us a defnition we can take to the bank.  See the graph for an illustration of this.  The red part is what we're talking about. 

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Advisor

Re: Ethanol........

According to my brokers propriety information the ethanol plant are currently losing 4 cents per gallon, once we get to January and the expiration of the blenders credit the ethanol plants lose 12 to 14 cents per gallon.  No I wont post the information.

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Senior Advisor

Re: Ethanol........

"According to my brokers propriety information the ethanol plant are currently losing 4 cents per gallon,"

 

Losing as in below the cost of capitol and return on equity or losing as in below the cost of feedstocks?  Is there not enough money to run or is there enough money to run but not enough to pay stockholders?

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Frequent Contributor

Re: Ethanol........

It would be interesting to figure out what the "cost" or average price of their contracted Jan deliveries is? I bet it's higher than the current cash price for corn?
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Veteran Advisor

Re: Ethanol........

Don't fixate on the price of corn.....it's all about the margin that was available......there may be less money made with $4.50 corn than $6.50 corn......

 

ethanol is a multi-legged stool with the three primary legs being the price of corn, price of ethanol, and price of RBOB/crude....other legs include the value of DDG"S and the energy cost (NG) to process the corn into ethanol and dry the DDG"S...

 

You cannot take into account one leg without understanding the relationships to the others....

 

** processors don't buy cash corn and spec on it....they either sell the ethanol/DDG's to capture the margin or hedge the corn to protect price risk....

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Senior Contributor

Re: Ethanol........

I guess ray you are about to close shop, IF 'VR is close in loses of 8 - 12 cents per gallon produced, how long does one run losing money.  How often have you ran in the red in the last 10 years.   I know of 3 years for my farm operation that after the year was done, I had ran  a negative balance and 3 of those years were in a 5 year time period.  What fun.  Merry christmas and a happy new year to a guy that works too much. SMILE!

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Veteran Advisor

Re: Ethanol........

An ISU researcher came up with a model, where you could punch in corn costs, etc, and it would figure the profit/loss per gallon, but all I come up with is a dead link, now.

Here's a blurb about it:

 

http://www.news.iastate.edu/news/2009/jan/ethanol.shtml

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