U.S. Weekly Ethanol Margins Fall Deeper into the Red

Posted on January 3, 2009. Filed under: Blender's Tax Credit, Hydrous Ethanol | Tags: , , , |

U.S. Weekly Ethanol Margins Fall Deeper into the Red


NEW YORK, Jan 2 (Reuters) – Average U.S. ethanol distillers lost even more money this week on higher corn prices and weak demand for motor fuel, analysts said.


“Right now ethanol is just not a profitable business,” said Pavel Mulchanov, an analyst at Raymond James & Associates in Houston.


Distillers were losing about 10 to 15 cents per gallon for the week ending Thursday, down about five cents.


Mulchanov said the profit margins were not sustainable because as distillers stop making the fuel, the price will go up. “There is a need for ethanol, refiners need it for blending reformulated gasoline,” he said.


Corn is the main input cost for U.S. ethanol makers. March corn CZ9 closed at about $4.07 a bushel on Wednesday, up 17 cents from late last month as crude oil futures rose. The Chicago Board of Trade was closed on Thursday.


As corn prices gained, ethanol prices have barely budged from low prices since last month. In the Midwest, ETHANOL/US spot ethanol was $1.57 a gallon unchanged from late last month. The poor margins have led to plant shutdowns and opening delays.



Lawyers for the top U.S. publicly-traded U.S. ethanol company VeraSun Energy Corp. said last this month that eight of the companies 16 ethanol distilleries were in “hot idle” or ready to operate, but not producing ethanol. The company filed for Chapter 11 bankruptcy protection in late October.


Even cellulosic ethanol companies that hope to make a new alternative motor fuel from non-food sources like agricultural waste and fast growing grasses and trees, have had troubles.


Construction of BlueFire Ethanol Inc’s planned Lancaster, California cellulosic plant will be delayed until the company raises more funding.


Despite the troubles, U.S. capacity to make ethanol has jumped 60 percent since last year to nearly 11.2 billion gallons per year.


The U.S. Renewable Fuels Standard mandate requires 11.1 billion gallons of biofuels to be blended into gasoline in 2009, which gave producers hope that margins would turn around this year.


Long term the RFS could be in trouble, however. The Energy Information Administration, the top U.S. energy forecaster, said last week that the United States would likely blend just 30 billion gallons per year of biofuels by 2022, not the 36 billion gallons the mandate requires.


The ethanol crush spread fell about 6 cents to 12 cents a gallon, using the formula of the Midwest ethanol price, minus the corn price divided by 2.8.


Operating costs such as natural gas prices and overhead trim the crush spread by about 25 cents per gallon. Some producers make the animal feed dried distillers grains as a byproduct of making ethanol, which can improve margins. (Reporting by Timothy Gardner; Editing by Christian Wiessner)



About Renergie

Renergie was formed by Ms. Meaghan M. Donovan on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.  Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol.  Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally.  On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program.  Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice.  On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector.  By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline.  Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops. 



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    Renergie created “field-to-pump," a unique strategy to locally produce and market advanced biofuel (“non-corn fuel ethanol”) via a network of small advanced biofuel manufacturing facilities. The purpose of “field-to-pump” is to maximize rural development and job creation while minimizing feedstock supply risk and the burden on local water supplies.


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