Platts 6Sep2013 ~ WEEKLY WRAP: Ethanol production margin jumps to highest level in over 21 months
The estimated weekly production margin for a typical US Midwest dry-mill ethanol plant jumped 22.99 cents, or 28.75%, this week to 102.99 cents/gal, according to a Platts estimate based on a Friday review of data.
The estimated weekly ethanol production margin rose for the fourth consecutive week. The last time the margin was any higher was on November 25, 2011, when it was 119.23 cents/gal.
The estimated weekly ethanol production margin has almost tripled since July 26, when it was 37.92 cents/gal.
This week's increase in the estimated weekly ethanol production margin was the result of a sizable drop in the cost of corn combined with a higher ethanol price.
The weekly average estimated delivered feedstock corn cost fell for the first time in five weeks, dropping 59.24 cents, or 9.32%, to $5.7621/bushel, the lowest level in almost 21 months. It had not been this low since December 16, 2011, when it was $5.6972/bushel.
Sources attributed the weaker corn price to improving prospects for the US corn harvest, which could be the most bountiful in years.
The weekly average estimated dried distillers grain byproduct price, however, rose for the third week in a row as it nudged 8 cents higher to a six-week high of $223.80/st on weaker ethanol production, analysts said, which tightened the supply of dried distillers grains in the marketplace.
Ethanol production for the reporting week that ended August 30 edged down 1,000 b/d to 819,000 b/d, the lowest level in five months, weekly US Energy Information Administration data showed Wednesday.
The estimated denaturant cost reversed course after three weeks of gains, decreasing 3.23 cents to a three-week low of $2.1635/gal, while the estimated natural gas cost gained 10 cents to $3.69/MMBtu.
The denaturant cost was based on the weekly average of the Platts natural gasoline assessment at the Conway, Kansas, hub, while the gas cost was based on the September Platts Chicago ANR 7 pipeline monthly index.
The estimated ethanol price used in calculating the margin was the weekly average of the Platts Chicago Argo ethanol assessment, which rose 1.31 cents to a 13-week high of $2.6694/gal, the fifth consecutive week of gains, on increasingly tight supply, sources said.
US Midwest ethanol stocks fell by 77,000 barrels for the reporting week that ended August 30 to 4.86 million barrels, the lowest level recorded by the EIA since it started tracking ethanol inventories in the reporting week that ended June 4, 2010.
Overall, US ethanol stocks in the same time period shrank 34,000 barrels to an eight-week low of 16.216 million barrels, EIA data showed Wednesday.
The estimated production margin for a typical dry-mill ethanol plant was calculated by weighing data from Platts and government agencies, including average delivered corn cost, dried distiller grain prices, natural gas prices, certain blending costs and ethanol prices.
Fixed-cost calculations were based on a 50 million gal/year-capacity Midwestern plant with 32 employees working at an average salary of $47,300/year.
If a 3% gain is what you call strong, you've got problems. The patent infringement case against REX is looking even stronger. Investors here will be blindsided by injunctions once the ruling is handed down. Treble damages will drain $10's of millions from the balance sheet in the twinkling of an eye. Strong Sell...