"Almost ALL of 2014 is locked in. And margins now are very good." 3/13/14 Bloomberg TV interview with Todd Becker.
Q1 will reveal solid and improved profits on increased production capacity.
Q2 all plants will be fully operational with corn oil. Even greater profitability.
End of 2014 debt paid off. Salvaged Interest expenses boost bottom line and SP
Forward EPS and P/E support $40 price target. In time.
Sentiment: Strong Buy
Been in the grain trade 25 years. Not the first dryer fire and not the last. 2 take aways: Rumor is safety practices were extremely well executed-No one got hurt. My info was the dryer was remote to ethanol production and will cause minor if any production losses. Safety planning and execution protects all of us!
Sentiment: Strong Buy
Reported at 4:40 on March 10
Check ethanolproducer magazine.
Dryer unit caught fire.
Fire was extenguished.
60mil gal is 6% of capacity.
Heading to ramping up demand for Spring. But Industry has the capacity to compensate.
Running other plants harder will balance out 2q production.
Transporation costs might be a negative.
Okay, went back and looked and saw where they accounted for that - my mistake - GPRE doing even better than I thought!
Last quarter earnings assumed the dilution, prior to the recall. Earnings were stated bith ways.
In the past few CC, since the stock was above $14, recall was assumed as part of the number of shares.
Last week GPRE announce a call on $90M convertible loan. The note converts at $13.78 per share so assuming the entire note converts to stock this will dilute the shares by 21%.
1) the additional share liquidity is good for a growing company.
2) that is $90M off the balance sheet and should save about 15 cents a share on interest/year (pre-tax).
3) it does dilute the stock & earnings by 21%.
I don't see how the current run up in the stock price is accounting for the dilution.
Inventory : 17.0M down .2m from17.2m barrels
Production: 905kbpd up 3kbpd from 902 ( series907, 903K, 900K, 902k).
Refiner Mix : 835kbpd up 29kbpd from (series .806K, 816K,815k, 802, 797 5-weeks ago)
Import ZERO (not a factor this year)
BUT one last comment on PAD Inventory--- STILL Dancing on a pin around 17m mil barrels.
East 5.0M! down 5.2 and from 5.4M ... EAST PAD might learn to live with less...
Midwest 6.9m up .2m from 6.7M ... Inventory might build there for Spring weather!
Gulf 2.8m down .1m
West 2.1 down .1
1) Refiner Mix used up the Inventory build last week,
2) Even with Production UP 126,000gallons/day, Between refiner demand and Export,
Inventory went down 8.8M gallons (200K barrels).
o Risk Of Over ethanol production and decreased demand (due to less driving due to weather) did not materialize. Export took on any slack.
o with DDG prices rebounding to meet demand, margins are back at 4Q level
o Changing back from Hold to a Buy
"We do not anticipate that any of the customers that have been significant to date will continue to represent a significant portion of our revenue in the next fiscal year."??
This sounds like bad news to me.
Please clarify how this is good news
o Inventory stayed practically FLAT ( +.1m)... but is backed-up in mid-west(+.5m), while EAST is down from ( 3m)....
All the other PADs are within last week level.
Export took the extra production (906) over Refiner Mix 8066kbp...
even though Refiner mix came down 10kbpd.
So it seems that there is an Extra 200K barrels in the system...
A small wack for Frozenomincs - easily adjustable by producers...
Fear of oversupply averted!!!
A lot of speculation and no facts. "Feb 21 COULD BE"."Stock MIGHT". "COULD BE that supply exceeded""Accounting MIGHT". "Donald Duck MIGHT".
wow. now I'm really scared. . . . . . . not.
The FACT is GPRE brokers their own commodities (nat gas), and you have NO CLUE as to what's really happening behind the desk there. Short term weekly spikes and movements are irrelevant. You CAN'T know how it affects their bottom line. Simply not possible. Perhaps they hedged . . . Becker has mentioned they do a lot of that.
Bottom line is our entire post is lame. Go try and scare investors somewhere else . . . . . . .
Today's dip was is an invitation to buy shares at a discount.
Good luck all traders and longs
EIA Feb 21 could be a show stopper, even if there is some delays impacting results. But it will take working out for a few weeks.
Frozenomics Signs are :
1- natgas costs are way up from anyone was modeling in January. Long term natgas prices will come down, but clearly 2Q margin will be impacted
2- corn is not staying cheap here. it is now 4.50 to 4.60. Last year it was wet ground and rain pushing out the planting season. This year if the frozen grounds has the same effect, near term corn prices will head up to allow the conr in stock carry demand into October again.
3- A lot of producers are running their plants FLAT OUT... From last Thursday Feb 13 when due to mid-west to east snow storm SHUTING not slowing driving for two days, slowing down trafiic during the week-end, followed by a day-off(President Day) 5 day of demand was affected... It could be that supply exceeded demand by 500-600 mil barrels. Could 1 Billion barrels if the midwest plants kept running.
4 - Any Frozen River / Truck Logistic challenges in Export, or Just the ups and down of export volume accounting might also create a bump in inventory.
Stock Might Jump up by 600-900Mil barrels in storage. (17.7m - 18m barrels inventory ).
Export demand might just be a delay, but local miles not driven just to winter-storm will not come back 100%...
5- For Remote Locations ( PEIX plants as example , or ethanol distribution points), the costs of transporation will eat away at somewaht at the margins.
Frozenomics will show up in Inventory, Demand, Margins and then later one run rate of the industry to prepare for Spring Demand.
Adjust your numbers down.... Still Positive. Price and Margins!!!
( Affected: non-public POET. ADM, VLO, GPRE, ANDE,REXX, PEIX...)
EIA number of Feb 21 will be INTERESTING.
yeap, they are about to issue 6.5m shares to redeem the conv $90m debt. At 72 common shares per $1000 debt, base cost for each share was $13.8/common. Nice gain!
USDA Projects sub-$4 Corn for a Decade
FEBRUARY 14, 2014
By: Ed Clark
Grain prices that have already fallen sharply in recent months are heading lower still over the upcoming decade, according to USDA’s long-term projections released Feb. 13.
For corn, the department’s econometric model points to a $4.50/bu. average farm price for the current marketing year, but below $4 for 2014 to 2025. USDA is calling for $3.65 for 2014/15, the decade low of $3.30 for 2015/16 and range from $3.35 to $3.95 from 2016 to 2021. In 2022 and 2023, USDA sees prices inching back above $4, but barely: $4.10 and $4.20.
Sentiment: Strong Buy
Piling It On, Strategically
In the fall of 2012, Green Plains Renewable Energy, sold 83 percent of its grain storage capacity. The move freed up capital, enabling the company to acquire more ethanol plants and make a big move toward outdoor corn storage. It's paying off.
By Susanne Retka Schill | February 16, 2014
Todd Becker says his job is to reallocate as much of the middleman margin as possible to the company’s bottom line. So it may have seemed odd when in the fall of 2012, the company he leads as CEO, Green Plains Renewable Energy Inc., sold 83 percent of its grain storage capacity.
Becker explains that the company wasn’t abandoning the strategy of being a first-handler of corn. The elevator system was making money and reducing risk. “But it wasn’t fully integrated in our supply chain,” he says. “We didn’t actually ship a lot of corn out of our facilities to our ethanol plants. A couple of years ago, we said, ‘We love the grain business, but what if there’s a better way to skin the cat?’” The company decided there is. Green Plains sold 12 grain elevators in Tennessee and Iowa to another ethanol producer with a good-sized grain business—The Andersons—for $133 million. “We had 38 million [bushels of] storage and we sold them 32.6 million [of it], but we’re not leaving the agriculture handling business,” Becker says. “We’re just going to reallocate that capital so it more closely aligns with our supply chain, with direct access to our ethanol production.”
The transaction worked well for both parties. Green Plains freed up capital and The Andersons extended its asset base in Iowa and into Tennessee. “We got to reallocate some resources in a different way, and we bought more ethanol plants,” Becker says. “We found a value we could sell at. They found a value they could buy at, and it worked for both of us. It was as important to them as it was for us.”
At a cost of between 50 cents and $1 a bushel, Green Plains is building permanent systems using an old strategy—piling corn outside. Installed first at Green Plains facilities in Fergus Falls, Minn., Riga, Mich., and Bluffton, Ind., the new grain storage systems are high velocity, high volume. “They’ve got walls, we cover and put air on them to keep the quality,” Becker explains. “And we have them right in line with assets—we have the roads already, got the rail, the scale, the people and a lot of land.”
Making better use of infrastructure is one advantage of the system, but there are others. With the first-handler margin ranging between 20 cents and 40 cents per bushel, being able to capture that margin on a larger proportion of grain purchases adds some long-term stability to the margin structure. The piles allow the company to buy more corn at harvest, when prices are typically the lowest, although there have been opportunities to refill the piles in the winter when prices were advantageous, Becker adds. Green Plains is also planning to add grain dryers at some facilities so they can handle more wet corn in future seasons. “We probably won’t keep [the corn] a whole year,” he adds, saying once the piles are opened, they want to move it all. “So you have to think about logistics and supply chain.”
Outdoor storage can increase the odds of corn going out of condition, but Green Plains currently mitigates that risk by buying dry corn and building aeration into its piles. The outdoor piles sit directly on the ground, rather than concrete or blacktop, so Green Plains relies on its ethanol plants’ screening systems to remove foreign material from the grain before grinding.
While the outside piles are boosting potential corn supplies at the ethanol facilities from the typical 10-day to a 45- or even 60-day supply, the ethanol plants actually don’t own the extra stored corn, but rather Green Plains’ grain division. “The ethanol plant typically buys corn and sells ethanol,” Becker says. “The grain company buys corn and sells corn futures. The grain company wants to earn the first-handle margin and carry, where the ethanol plant wants to earn the crush. They’re two separate distinct businesses. When the corn gets picked up from the ground after the economic incentive to hold the corn is gone, if the ethanol plant is the best bid, we’ll send it to the ethanol plant. If it’s not the best bid, we’ll truck to somebody else’s demand.”
The piles at the first three facilities quickly paid for themselves. By the end of this year, the company expects to have 37 million bushels of storage across the system, almost recreating the storage sold in 2012 and at a quarter of the cost or better. The goal is to be at 50 million bushels by the end of 2015. “People are watching what we’re doing,” Becker says. “We get a lot of calls from plants asking how to do this.” Building the piles isn’t the biggest issue, he adds. 50 million bushels of storage capacity at $4 corn potentially requires a hefty $200 million line of credit. “You need to have the capability to finance the inventory and make the margin calls while you’re holding the corn,” he advises. “The easiest and cheapest part of it is to build the pile.”
Sentiment: Strong Buy
Ethanol industry back in the black after rough years
Article by: DAVID SHAFFER , Star Tribune Updated: February 14, 2014 - 8:44 AM
Lower corn prices, more driving and strong exports get credit for the turnaround.
Boom times are back in the ethanol business.
Major producers of the corn-based fuel are reporting record returns for the fourth quarter thanks to dramatically lower corn prices, increasing demand for motor fuel and strong ethanol exports.
It’s a complete reversal from 2012, when drought sent corn prices higher than $8 per bushel, leaving many of the nation’s 210 ethanol plants unprofitable and forcing some to close and others to be sold.
Green Plains Renewable Energy, the nation’s fourth-largest ethanol producer with two plants in Minnesota and 10 elsewhere, recently reported that the last quarter of 2013 was its best ever — and the current quarter may be better. Valero, the nation’s third-largest ethanol producer and owner of Minnesota’s largest ethanol plant and nine more in other states, also reported record ethanol operating income in the fourth quarter.
“We had a good corn crop, and more ethanol usage and for the strong producers that survived … the windfall profits have followed,” said Jason Ward, Minneapolis-based analyst for Northstar Commodity Investment Co., an advisory service.
Biofuel Benchmarking, an analytics service that tracks more than 40 U.S. ethanol plants, reported that producers had average net income of 46 cents per gallon in the fourth quarter — the most profitable since the industry’s banner year of 2006 when some plants’ profits hit $1 per gallon.
“This reiterates that the industry is going to sustain itself,” said Paula Emberland, who manages Biofuel Benchmarking for Christianson & Associates of Willmar, Minn.
It’s also a pleasant aftershock to an industry battered by the 2012 drought that sent corn prices soaring and helped ignite a still-unfinished fight with the federal government, the oil industry and other interests over scaling back the U.S. ethanol blending mandate.
The record 2013 corn harvest has sent prices down to near $4 per bushel. “Their biggest input just got cheaper,” said Ward of Northstar Commodities.
Motorists also used more gasoline last year for the first time in five years, Ward said. Starting in early 2013, ethanol plant margins have climbed steadily, he added. “It has done nothing but go north,” Ward said.
Michael Cox, an analyst with Piper Jaffray & Co. in Minneapolis, said that ethanol’s strong showing illustrates how an industry launched with government subsidies now operates on basic supply and demand.
“It is in a very good spot right now, and I think it will stay that way through 2014,” Cox said.
China exports rising
Exports of ethanol are expected to stay strong, he and others said. Green Plains, the Omaha-based ethanol maker with production capacity of 1 billion gallons per year, said 11 percent of its first-quarter ethanol will be exported, and 20 percent of its second-quarter volume. Noting the first recent U.S. exports to China in November, CEO Todd Becker said that country’s market “could be a potential game-changer for the industry globally.”
Green Plains owns Minnesota plants in Fergus Falls and Fairmont. The Fairmont plant was acquired for $53.5 million from a failing producer’s bank and was reopened in December. The extra output helped drive up that company’s revenues and earnings.
Becker recently told analysts that the first quarter of 2014 should be as good or better than the past quarter.
Archer Daniels Midland Co., the nation’s largest ethanol producer whose plants include one in Marshall, Minn., also reported strong ethanol results in the first quarter and expects the biofuel business to remain healthy.
Minnesota has 20 ethanol plants, many of which don’t report financial results publicly. Biofuel Benchmarking, which releases only combined results, reported that Minnesota ethanol makers had average net income of 43 cents per gallon in the fourth quarter, compared with a 2 cent-per-gallon loss a year ago. For the year, Minnesota producers’ average net income of 25 cents per gallon, compared with a 15-cent loss per gallon in 2012.
Larry Johnson, a Cologne, Minn., ethanol industry consultant, said the margins of the past quarter equate to a more than 20 percent return on investment. “That does make up for the zero return on investment for a couple of previous years,” he said.
Not all ethanol makers are seeing a boom. A plant in Buffalo Lake, Minn., remains closed after being sold in a bankruptcy case last year. Biofuel Energy Corp., former owner of the Fairmont plant, is out of the biofuel business after its lender sold off both of its production facilities.
Looking ahead, Johnson said, the industry probably won’t lose the entire battle over the ethanol blending mandate in 2014. Exports are up, and he expects corn production to be high this year.
“There’s a pretty solid sense of optimism in the industry,” Johnson added.
Brazil, the world's largest exporter of ethanol, will have a "tough time" competing with US supplies in 2014 as last year's bumper corn harvest in the US has sent prices for the biofuel to lows not seen since 2010, US-based Bunge said in a conference call with investors on Thursday.
Bunge, one of the world's largest agricultural trading houses with ethanol plants in the US and Brazil, said the US is in the process of capturing a bigger portion of the global ethanol trade, particularly in destinations that don't distinguish between the greenhouse-gas intensity of different types of ethanol.
Ethanol from sugarcane, the type made in Brazil, releases 61% less carbon pollutants than gasoline and three times less than ethanol from corn, the type produced in the US, according to the US Environmental Protection Agency.
The spot ethanol price in Chicago, a major US fuels trading hub, slumped to $1.6875/gal on November 21, the lowest since July 2010, according to Platts data, as corn deliveries from a record-high crop brought production costs down.
The spot ethanol price in Chicago closed at $1.98/gal on Wednesday.
US ethanol exports in 2013 tallied 2.3 billion gallons, 16% below 2012 and lagging Brazil's 2.9 billion gallon, according to official trade figures.
But US ethanol exports surged in the last two months of the year to the highest monthly levels seen in 2013, with November setting a new record of 82.4 million gallons, the strongest volume since March 2012.
Bunge said Brazil could combat US competition by improving conditions in its domestic market, namely leveling out local fuel prices with international fuel prices.
Brazil's policy to limit gasoline prices as a means of controlling inflation puts a de facto cap on ethanol prices, which cannot rise beyond its energy-parity level with gasoline without losing market share at pumps.
Brazil is currently selling gasoline 25% below international prices, according to Bunge's estimates.
The companies executives also said in the call that the current inter-crop ethanol price in Brazil is favorable, but it is not expected to last as this year's harvest commences in April.
Brazil's contentious gasoline pricing policy has been at the heart of discussions between sugar and ethanol producers and the government, which is facing increased pressure to help millers restore profitability amid increased operational costs and four consecutive years of global sugar surpluses.
Bunge, Brazil's second largest processor of sugarcane crop after Cosan, said in October it was conducting a review of its milling business including the potential sale of assets after a streak of disappointing earnings.
West Coast Spot Ethanol Prices Gain Amid Shipping Delays
U.S. spot ethanol prices along the West Coast rallied on tight supply tied to limited railcar capacity to deliver the product. Stocks in Arizona are down because there are no rail cars to replenish supply being used. "I'm just hearing [rail] car turnaround is bad," said a source. "It's worse," added another source.
Prompt delivered ethanol to California was talked 7.0 cents higher at a $2.50 to $2.54 gal bid/ask spread while prompt delivered Arizona ethanol was seen at $2.50 gal, up 9.0 cents on the day.
George Orwel DTN Energy Reporter
Rally for NY, Calif. Spot Ethanol Prices
U.S. spot ethanol prices rose across the board in early afternoon trade Wednesday, though the biggest rally was seen along the East and West coasts as limited railcar capacity to deliver the product to customers caused ethanol shortages in some regional hubs. traders said, New York Harbor ethanol barge for prompt delivery was pegged at $2.50 per gallon,while West Coast locations posted gains of 14 to 17 cents per gallon as increased buyer support quickly stepped into the market.
The data supported speculations weather-related woes continue to curtail production, delay shipments and squeeze available supply. This storm system is slowing switching rail and hub operations throughout the Midwest and into Chicago. The added challenge of extreme subzero temperatures across BNSF northern
routes will adversely affect arrivals, departures and train sizes between Chicago and the Pacific Northwest."
On the New York Harbor, an ethanol barge for prompt delivery was higher due to tightness in railcars.
Ethanol shippers face monstrous waits for rail cars as more crude oil from North Dakota rides the rails to refineries. The shortage of rail cars contributing to the ethanol price increase was due to competition from shale oil movements.Extrapolating those market movements into ethanol plant profit margins, however, is dependent upon economic models that simulate input costs and revenues, with multiple assumptions built in for ethanol yield, operating fixed costs and mainly the location of the plant as well as locations they ship to.