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North of Iowa | The price of ethanol has taken a nose dive here since Sept. can they make any money at these prices or will we start to here about cut backs and shut downs. Local plant has told me if they can't make money they will shut plant down. |
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Flora IL | sure hope so.. rather use ethanol than saudi oil.. |
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| i was pricing corn the other day and heard of several cases in KS where they were slowing down/shutting down till it was more profitable |
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WC KS | They are colwich KS and Portales NM of Abengoa ownership. Both plants are the early generation so Neither plant is probably very efficient. Other Abengoa plants are still operating.
Edited by lazifarmer 12/22/2011 23:09
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Adams, NE | It depends on the type of plant and location. Some are profitable today, some cannot even cover their interest expense. |
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| Today, yes. But ethanol is just finishing up a very profitable year. |
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Custer County, Nebraska | Many of these plants have been running full out, trying to maximize production before the tax credit expires at the end of the year. I would expect some plants to slow down production, perhaps an excellent time to do maintenance that might have been put off. |
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Adams, NE | It has been a great year, the best since 2006 (unfortunaely, not many were operating back then). The economics to run are not based on history or previous profits. Why would anyone give up previous profits when the economics of today are telling you to slow-down or shut-down (and yes, everyones squeeze points and triggers are different)? A bio-refinery should never operate at full capacity when the economics dictate a slow-down or shut-down situation...the market will destory businesses that do not respond to the economics of today. You an always speed up or start-up later. Corn will either come down via lower futures or weaker basis and/or ethanol/ddgs will come up as people make the correct economic decision. |
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Adams, NE | Plants were not running all out to front-run the blenders credit (plants do not get the blenders credit). The backwardation in ethanol in October-November to January was greater than the blender's credit...making the front-running uneconomic for the blender. Demand was strong, while production was weak because of poor yields associated with the early corn (and scheduled maintenance). Logistics were a mess exacerbating the problem. Ethanol traded over Chicago FOB Iowa and Nebraska for much of November, crashing to huge negatives in December. That tells me we had major logistical issues. |
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Boone Co. Iowa | http://www.ams.usda.gov/mnreports/nw_gr212.txt
Much easier to read if you click on the link above. That $1.44 figure at the bottom is about as low as I've seen in the past few years that I can remember. (I get this email once a week.) Over the next 6 months, ethanol is going to have to go up or corn is going to have to go down.
Was cash corn really $3.76 one year ago?
NW_GR212
Des Moines IA Fri, Dec 23, 2011 USDA Market News
Iowa Ethanol Corn and Co-Products Processing Values
Corn prices compared with value of processing products for Iowa ethanol plants
This week Last week Last year
Unit Dec 23, 2011 Dec 16, 2011 Dec 24, 2010
Ethanol
tank cars & trucks
Iowa plants $/gal 2.09 2.16 1.87
Ethanol yield per
bushel processed gal 2.80 2.80 2.80
Value from bushel
of corn $ 5.85 6.05 5.24
Distillers Dried
Grains, 10% moisture
Iowa plants $/ton 180.75 183.50 108.75
DDGS yield per
bushel processed lbs 17.75 17.75 17.75
Value from bushel
of corn $ 1.60 1.63 0.97
Value of ethanol and
DDGS from bushel
of corn $ 7.45 7.68 6.21
No. 2 Yellow Corn
truck price
IA points $/bu 6.01 5.64 3.76
Difference between
corn price & value
of co-products $ 1.44 2.04 2.45
Edited by WeaveFarmer 12/23/2011 09:41
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Adams, NE | I see bids in the $5.50 to $6.00 range last year. |
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| not currently profitable? Or just not as profitable as in the past? |
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| March 2011 CBOT corn price was $6.15 on 12/27/10, so the USDA # is INCORRECT.
Doesn't that just give you a warm and fuzzy feeling about all of the numbers released by the USDA!
Edited by Hotndusty 12/23/2011 10:32
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Adams, NE | some are profitable...some are not cash flowing. The economic differences between each plant is amazingly different (regardless of what some experts say). The numbers showing the difference in benchmarking are jaw-dropping . |
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| There's no doubt that the plants "got busy" in quarter 4.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPOOXE_YOP_NUS_MBBLD&f=W
What will 2012 look like? |
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Northeast Misery | I was under the impression that running less than full capacity hurts profitability ?
Are you talking about slowing to 90-95% or 60-70%? |
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NEMO | I dont see a minus in front of any of those numbers. So I guess the difference in price of co-products of a +$1.44 means they are losing money and should either stop production or slow it? Another question I would ask is the Cost Of Production figured into those co-product numbers? |
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NW Ohio | Ethanol Insider, thanks for your input. By the sounds of some of these posts, even a few people in agriculture don't understand the blender's credit and still think the ethanol plants get the credit. It's pretty hard to educate the public on farming affairs when even farm folks don't understand it. As far as slowing down production...that doesn't make sense either. If your profit margin is less, you need to produce more to sustain earnings and overall profits. That only works of course if you are not in the red and losing money. If the ethanol plants are losing money, I could see a stoppage or slowdown. Otherwise, they adjust their basis, pay less for corn, and continue to produce. |
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central MN | From Econ 101, and this applies to our farms as well, the important thing is return over variable costs because the fixed costs must be met one way or the other |
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Adams, NE | Its hard to increase production (when margins are down significantly) when you are running flat out. Its about your variable costs. If you slow down, you can widen your corn basis (do not have to buy, buy, buy, buy, buy) charge more for distillers (do not have to sell, sell, sell, sell, sell, sell) and improve your margins. If it gets too bad and you are not covering your variable costs...shut down it will get better later
Also, the basis is not only determined at the plant...there are other users of corn that end up dictating the corn basis. It is not like you can widen your corn basis and buy more corn without some serious help from the farmer. |
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North of Iowa | Visited with a friend that has shares in a older plant, he said he just got his check for the last quarter, and was paid .40 under local market, so I guess no they can't make any money at current prices. Was told by another manager that they would have to lower there input cost to be profitable. Lower corn price. |
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Adams, NE | Thanks for input. You proved one of my points...there is a big difference between plants. The well-run midwestern Fagen/ICM plants "printed" money the last quarter. |
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North of Iowa | I should say that the plants that are run with farmers bus. probable won't shut down, they just will pay farmer less for his corn. The ones that buy corn are the ones that would shut down when in the red. |
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Can ethanol plants make any money?
