Ethanol plants rebound after tough year "It doesn't take a lot of math ability to see that is a big improvement for us,"
Ethanol plants rebound after tough year
June 15, 2013
The ethanol industry, which was reeling from a drought-induced downturn last year, is making a comeback.
"Last year was such a beatdown in the industry," said Thomas Hitchcock, Redfield Energy CEO. "This year is a much better picture."
Hitchcock said the most important financial margin — the cost of buying corn versus the selling price of ethanol — has improved significantly since the beginning of the year. Since Jan. 2, corn prices are down 48 cents a bushel, and wholesale ethanol prices are up 27 cents a gallon, he said.
"It doesn't take a lot of math ability to see that is a big improvement for us," Hitchcock said. "Corn is 80 percent of the cost of production, so when the corn price goes down and the price of the ethanol we sell goes up at the same time, we are doing well."
from this level the math gets better:
a) lower cost with milo and at the same time get supply closer to plant locations
b) increase revenue with corn extraction and
c) increase sales volume with in-house production (ie convert some of the resold vlume with in-house production).
Now not yet in sight for PEIX, but if one follows GPRE, eventually two more turns of the screw are also possible:
1) do soft crush to smooth out cost and revenue
2) pay down debt will lower interests
Then eventually, buy back shares ( one can dream but above staircase is good enough).