Wednesday, February 10, 2016

Ethanol plants are also hurting. (Kinder Morgan terminal)

I assume E85 is a small fraction of the market for ethanol compared to adding it to regular gas as a anti-pollution additive. I figure E85 has to be 80% of the price of gas to offset the reduced miles/gallon. I used to see a difference of up to a dollar. Now I'm not even looking at E85 prices because they can't compete with cheap gas. It is interesting that ADM is trying to dump what sounds like its newest, biggest plants because they should be the most efficient. It also flags another company's management that probably got suckered into a boom-and-bust cycle at the wrong time.

Google Photo
Closing ethanol plants has to further hurt the price of corn. Consecutive years of bumper corn crops have filled the grain elevators, and they are already offering low prices to farmers because they really don't need much corn this year.

Update in Dec 2016:
The margin for ethanol is going back up. I can't find the article I saw that said our exports have increased to northern Brazil because southern Brazil is keeping its sugar cane to make more sugar. US ethanol crush margin reaches nearly two-year high. An interesting fact in that article is that one bushel of corn makes 2.8 gallons of ethanol. This also reinforces my theory that the price of ethanol follows the price of gasoline, not the price of corn.

2/20/2019:  Kinder Morgan to expand Chicago ethanol hub to calm glut concerns    barge terminal
"Currently, Argo can unload roughly 120 to 150 tank cars of ethanol each week, or roughly 4 million gallons, and can load two barges, or roughly 1.2 million gallons, at a time." ADM is sending a bunch of ethanol there to drive prices down. "ADM can produce roughly 1.6 billion gallons of ethanol annually, about 10 percent of U.S. capacity. Despite its massive production, it has often been a buyer on the cash market to supplement its long-term supply deals or to support a market view, dealers said. The Illinois-based global commodities powerhouse accounted for roughly 70 percent of the ethanol sold at the Chicago hub late last year, according to the data reviewed by Reuters."

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