Ethanol........

[stupid]

Many ethanol plants can run negative on ethanol, their profits are from ddgs.

[vrbuck]

That is with ddgs

[rayjenkins]

Improved margins in last half of 2011 were enough to get some of these dormant and/or financially impaired destination plants interested in starting back up again.....looks like they could be coming back on line just as margins peaked and rolled over......although no one really knows how the transition away from VEETEC will go with 100% certainty, it appears there better be real strong export demand (Brazil) for ethanol, or the industry could be in for a period of weak margins....

and none of this takes into account what might happen with a bullish feedgrains/stocks number in the Jan report!

Place your bets, gentlemen, place your bets....

[Red Steele]

I imagine that information on the plants that are coming online is available if you know where to look. Is this public information, or does it require insider intelligence?

Also, when plants close down production, for example if corn would skyrocket to $10 per bushel and plants would decide to sell their inventories rather than process corn, is this information available?

Thanks for your postings and insights at times. I am always interested in information on what is going on in the corn industry and you possess a lot of information that most do not.

[roarintiger1]

"If corn skyrockets to $10 and plants would sell their inventories..."

I can save you the trouble of looking for that.....'cause it ain't happened......................yet.

[rayjenkins]

Hello Red....I use a couple of sources for ethanol information......first is a google news search with the word "ethanol".....second is the www.grainnet.com website.....when you hit the "enter here" button you will find a lot of links to grain stories.....up at the top is a link to "biofuels journal" which opens up a section with lots of news stories related to biofuels.....for instance, in today's info is an article about the reopening of the Clatskanie, OR ethanol facility....both provide good ways to keep in touch with latest news....a lot of these ethanol companies that need to provide info to the SEC are coming out with their 10-K quarterly/yearly updates right now, and you can see how some have been performing....in the google news section for ethanol is a story/link to Golden Grain Energy at Mason City Iowa's 10-k info...they are a well run plant and financials show it, too

as far as ethanol plants selling back feedstock.....if you throw out what may have happened in the 2008-2009 time period where just about anything could, and did happen.......the only instance where corn was sold and plants were shut down occurred back in 1996 when High Plains Ethanol in Colwich, KS did just that....they were a publicly traded company at that time, later bought out by Abengoa....they had either purchased or owned options on their 1996 corn supply from back in Sept of '95....corn went up in price, but ethanol did not react to the upside, leaving them with the choice of making ethanol at a loss or selling corn at a profit......also, many of the small ethanol plants were structured such that the farmers owed corn to the ethanol plant....once that supply was consumed those plants started shutting down.....eventually, and it took until July/early August, the price of ethanol finalling reacted to the upside.....two resaons I remember all this...first, I was trading High Plains Ethanol stock at the time...second, our plant (which is 85% food/fermentation and only 15% ethanol grind) was not going to run it's ethanol capacity in August of 1996.....but the price of ethanol went up enough that the head shed from MPLS called down and wanted to know what it would take to buy the 1+ million bushels of corn needed to make the August ethanol grind......we shot them some crazy number like +150 over the September because we truly didn't have a clue if we could find the corn......to our amazement, they told us to go buy the corn!

[Red Steele]

Thanks for the info Ray.

I think there may be a little upside in these markets. I have had feelers out for putting up some hog confinement barns, to get the fertilizer, and this past week I got a call from someone looking to build three barns on someone's land. So there must be enough profit in hogs right now, at the price of corn where it is, for livestock expansion to begin occuring again.

If ethanol production stays flat, or increases with some new plants, the China demand keeps up, and if some hiccups happen in South American production, we may see some interesting times by spring. I don't know anyone selling any quantities of corn right now....they either priced too much too soon via forward contracts and want to hit the homerun on what is left, or they are flush with cash from $7 sales in 2011 already, or  they just didn't harvest the bushels, or some combination thereof.

Not to say that high prices from now to spring and diminished demand won't cause a train wreck if the proverbial "binbuster" of a corn crop happens in 2012, but I think it is more likely that we are not going to see a huge yield per acre anytime soon with the conditions that give us more acres....corn on corn with its yield hit, expansion of corn acres into areas that just don't grow 200 bushels per acre ever, and more weather events than we had during the last couple of decades.

Hang on to your hat. I think the odds favor corn going back to $7 per bushel , at least for a short spell if not an extended stay.

[rayjenkins]

Merry Christmas Red and everyone else, too.

With the 2011 corn harvest wrapping up early (and short), I always feared an extended period of time between end of harvest and the first of the year when the market might enter a period of dormancy or re-trenchment.....and that is just what we got this year...in early/mid November there was no real weather story in SA and the daily news was full of EU gloom and doom.....although there can be a few days of shock/awe about an EU country default, I have to wonder if, just like a commodity market, the EU story has run most of it's course as far as being the big story....

I sense the US economy is slowly getting better and some of the stories I read/hear about housing make me wonder if a year from now we will be reading about more houses being built---definitely not like the red-hot pace of the mid 2000's, but finally something that may put some folks back to work....

right now, I think the grain markets are all about the La Nina and how much SA production could be trimmed back in the next 2-4 weeks with heat and subpar moisture. Then we get to see the Jan 12 crop report and those grain stocks/feed usage numbers. By mid-Feb 1, we'll be talking about our spring weather in earnest, especially if La Nina did a number on SA and that may portend for our spring weather...

It's about to get a lot more interesting

Ray J