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Senior Advisor

Farmers get the ethanol profit

Iowa State says that sometimes the ethanol producer gets the profit, sometimes the farmer.  Right now, it's the farmer, they say.

 

http://www.farmgateblog.com/article/who-is-making-money-from-ethanol-farmers-or-refiners

 

 

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12 Replies
Veteran Contributor

Re: Farmers get the ethanol profit

Ethanol was at breakeven for most of  '09 and '10?  And now that the price of corn is double what it was, they are still making ethanol.

 

I wonder how that is possible. 

 

The price of corn must be a small factor in the profitability of the ethanol plants (relative to the price of oil). 

 

I suppose it also helps that the distiller's grain can be sold for a higher price.

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Advisor

Re: Farmers get the ethanol profit

   I read recently they get 2.74-2.8 gallons of ethanol from a bushel of corn.   $7.60 local price corn divided by 2.75 = $2.73.  Gasoline is mostly $3.69 a gallon.   Plus blenders credit and DG's.  I have no idea what their cost of production is to produce ethanol but it would seem there is profit to be made yet.

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Veteran Contributor

Re: Farmers get the ethanol profit

And by the same caculations they should have done really well when corn was purchased below $4.00.

 

$4.00 divided by 2.75 = $1.45/gallon.

 

 

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Re: Farmers get the ethanol profit

And of course if the profit flows to farmers then the final place it goes is to the landowner through rising rents and land prices. 

 

Pretty well established fact, just like farm subsidies.

 

Just hope we can get through the max out point in the ethanol mandate and build stocks without having a catastrophe first..

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Highlighted
Contributor

Re: Farmers get the ethanol profit

Here is a website where they calculate the gross margin for the ethanol producer.  Gross margin is up from a year ago so if they were able to keep costs in line profits should be up as well.  http://www.ams.usda.gov/mnreports/gx_gr212.txt

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Senior Advisor

Re: Farmers get the ethanol profit

Yeah, I just got my deferred dividend from the local coop. I sent it all to my landlord. He can't wait until I get the interest payment from my CD's.

 

The point being that we are competing with our neighbors to rent ground. We are not limited by the income produced on the specific farm. We can give them about everything we take in. But we don't because we don't have to. That gift of federal subsidies to the landowner is a personal choice. We have no one but ourselves to blame for our high rents.

 

Is renting ground an addiction that we can only cure by "just say no?"

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Advisor

Re: Farmers get the ethanol profit

kudos kraft

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Senior Contributor

Re: Farmers get the ethanol profit

i just say no and i havent even been asked!LOL

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Senior Advisor

Re: Farmers get the ethanol profit

If I have apotential 200 bushel corn crop and price are nearly $7 that is almost $1400 gross. So just how much impact will a $20 or $30 per acre government subsidy have? We are talking peanuts here and and I am surprised that it is even seriously considered as a factor when negotiating rent.

 

I just got new eyes (cateract surgery) and i still wouldn't bet much on them. Ha!

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