Posted 10/5/2009 15:47 (#872062 - in reply to #871957) Subject: RE: Interesting chart with Corn and Ethanol
Lots of reasons.
US ethanol into the EU is about 25 cents per gallon below Brazilian ethanol into the EU. US ethanol is cheap on the world market versus other sources.
Production is less in September and early October because of plant down times. Over 40% of the industry takes their annual shut-down during this time frame. Even though the shut-down is typically three to five days, this is a significant amount of "lost" production in a tight supply market.
Domestic ethanol demand is a record because ethanol had been (please note the had been) cheap relative to RBOB gasoline. Blending infrastructure has increased substantially in the last year, therefore the big increase in demand.
The ethanol stocks to use ratio is tight at less than 19 days of use today. We are at the bottom of the tanks in many areas. These tanks cannot be completely emptied because of concerns about structural integraty of the tanks, therefore we have limited stocks to pull from. We can only ship what is produced today.
The delayed corn harvest is putting pressure on origination for corn. Because corn supplies are very, very tight, many dry mill ethanol plants are having to push the moisture content in their corn to continue operations. Wet corn does not run thru hammer mills very well and causes the plant to slow down their grind. Slower grind, means less production regardless of the spot margins.
Demand exceeds supply at this time, therefore the higher prices.