ethanol stocks burdensome??????

[GoredHusker]

The problem with the theory of stockpiling ethanol revolves around storage.  Currently, 95-96 percent of the nation's ethanol storage is exhausted.  Ethanol plants are getting creamed from every angle it seems right now.  Ethanol exports have dried up considerably since December.  Domestic gasoline usage is at an 11 year low.  With gasoline prices slowly but surely creeping towards 4 bucks by summer, it all but assures gasoline usage to stay considerably low.  So, here lies the problem.  It matters little if ethanol plants are profitable because ethanol storage is all but at capacity.  We're not using a lot of ethanol because it must be blended with gasoline that is being used at an 11 year low.  We're not exporting massive quantities of ethanol because Brazil lowered their mandate.  Europe is in a recession.  It just hasn't hit the national media yet.  If gasoline prices here in the U.S. gets up to 4 bucks and stays there for an extended period of time, we will also be in a recession. 

The problem isn't having a ton to sell at much higher prices.  The problem is watching prices gradually slide lower because of the hangover of having storage at full capacity.  It seems to me that corn being used for ethanol has been extremely front loaded.  The problem is that ethanol plants have only averaged using 1.8 million bushels per week over the average needed to meet USDA projections, and we have over half of the marketing year left to go.  It is quite realistic that for the remainder of the marketing year that ethanol plants back off more than 1.8 million bushels per week which means we fall short of USDA projections thus adding bushels to carryover. 

If one thinks intermediate to long term here, 4-5 dollar gas is about the worst thing that can happen not only for grains but for the country.  It will bring about a recession.  I think we all know what happened to the grain markets in 2008 when we were hit with a recession.  If recession takes a grip on the U.S., people will drive less using less ethanol.  People will cut back on high priced meat thus driving prices for meats lower causing another round of herd liquidations meaning less grains for feed.  With it being an election year, I highly doubt massive stimulus from the gov't will happen given how unpopular with the masses it was the last time.     

[teaspoon73]

   DKIL ,  is right. With the closing of 7 refineries in the last 2months it has left the US short of gas. Goredhusker if you think gas is creeping up you  just watch the signs change at the filling stations this week!  This shortfall in product will come from outside this country from oil priced at Brent crude prices. That is over 120 a barrel.. Four dollar gas ? That will sound cheap. Ethanol  stocks will disappear fast,  Take a look at an RBOB chart or Crude oil. Then look at a Dollar chart. A cheaper dollar means much higher gas prices. The  Chinese just stepped on the gas peddle over the weekend, as did the EU thanks to the IMF. That is the US taxdollars in covert action. 

[GoredHusker]

I think one needs to define the terms cheap dollar.  The U.S. dollar index is roughly 12 percent higher than it was at the lows in 2008.  With Europe in a recession, it will be very difficult to keep the U.S. dollar index much below 80.  I fully agree that a cheap dollar means higher gas price, but I'm not in the camp that believes the dollar tanks in here given the European problems.  Even the Europeans acknowledge that Greece will eventually default and more than likely be kicked out of the EU.  Portugal seems to be the next most immediate threat with 10 year treasuries there trading at 12% and a 14% unemployment to boot. 

The other problem we face with regards to a cheap dollar is the fact that this is an election year.  Even though the economic reports have been doctored to death, the reports are showing an improving U.S. economy.  Given this, it will be very difficult for Helicopter Ben to implement QE3.  Higher fuel prices will drive us into a recession.  However, this more than likely causes the dollar to rise rather than fall just like it did in 2008 when we went from roughly 71 to roughly 90 in a short few months causing oil to fall from roughly 150 to 33.  Ethanol stocks will not disappear fast with four plus gasoline because people will continue to drive less and less.  The only way ethanol stocks disappear fast is if plants drastically slow production and/or Brazil and other countries start importing again.