Export volume is not accounted for WEEKLY.
As export volume gyrates, EIA data is adjusted with Monthly export data.
With a 800M-1B gallons yearly rate, this is 65M to 80M monthly rate.
This week increase 1.1m barrels is a 46m gallons delta which can easily be gallons heading out... To be accounted for when export figures are in.
Also, be aware that ethanol plants turn around ( for maintenance) are ahead.
Look for tight inventory supply to come back into line; thus price to re-adjust up slightly
Todays brazil economic headiline ...
Among the details:
"Airfares also drove inflation up, rising 17.6 percent from
Anyone has traffic data?
Nice change to the business model,when combined with lower rates on $325M bond swap just completed
Ok folks, here is why it is safe here.
1. Correction was across the board.
Now one can choose to go in before a moderate rise back-up
2. Both GPRE and PEIX came to the forefront with a review YESTERDAY
3. More importantlty, the market misread Three factors.
1. Inventory build-up to 18.8m barrels is misunderstood ( per GPRE comments). I will discuss below.
2. What was not said is the following : Mid-harvest, just about now next week, the ethanol plants will shut down for a fe days for maintenance! So a little build ahead is normal.
3. Most importantly: ship extra fuel now rather than later when the locomotives are needed for grains.
But Price wise, here is why inventory is mis-understood.
Both GPRE and PEIX reconfirmed EXPORTS to be 800 million to 1000 for the the year.
This means 65mil to 80mil per month on a run rate. Last week invenotry increase was 800K barrels and the week before 300K barrels for a total 1.1m barrels or 46.2mil gallons.
GPRE said it is thought JUST TO ACCUMULATE the volume for exports,
and it is 'sloppy' accounting by the industry.
What does 'sloppy means'? Sold already by the producers and shipped to a PAD ( down river) and the gallons are in port waiting for a ship to head to Mexico, ...
Given the plants turn around window one needs to load up the EAST pad area.
Notice this pad is filling up.
Prediction: Price adjustment is ovedone and adjustment upward is ahead.
Stock prices will adjust between here and mid-point to last high.
( Note PEIX still has three possible dilutive transations ahead, but a lot of cash. So buy the leaders and others will trail but still correct). Ranking REX, GPRE, ANDE, ADM,PEIX,AMTX, GEVO
I have always heard of SELL-side vs BUY-side analyst.
I can never tell which one is which.
Do you assume that they are all buy-side?
Sept 18 Update - Premium at 15c
Premium does not cover Basis
1) However, since we do not know the quoted price for WDG,
the margins maybe ( I say maybe) slowing down at a slower pace....
2) Funny that today Neil K. referred to the 20c Premium as covering the extra cost
of transportation of corn from mid-west to the west.
Sell to 15 and then re-assess
Exports are good and now included in the nums.
However, an INCREASE from here will take some doing.
Brazil placed a 3% incentive on their export opportunities.
So there is some competition in the WINGS for next year.
It is not all clear sailing, when California and USDA gives 1.5x thr RINs
value to cane-based ethanol. Thye can still come-in to pick-up
some gallons in CA.
Look around the corner and not up to the sky.
Seasonal fluctuations in commodities is not specualtive...
When everyone says ( proudly) : we are running flat out, and new plants open up their doors at the peak, extra supply is negative.
My problem is that you folks do not see around the corners.
Even after a 3 for 1 Dilution ( 9 mil to 28mil shares soon, now at 25m)
Capacityy will drop because it is the season...
No one will fold because everyone watns to make some money ( just like all the farmers planted as much corn as they could).
$1.50 is the pain point where they will slow down.
Export has its limits too ( regulations / competition).
Corn cost in the west is unfortunately higher, even with the total harvest is
more than ample. Daily crush does not help- cost is sunked-in.
Do the math... $1.50, 3.20 corn plus $1.20 basis.
Extra supply in a decreasing demand, due to seasonal patterns.
To reach a stable LOWER plateau, plants will neede to slow down!
Lower volume at a lower price.... still positive margins but at a much lower margin.
Do not count Q3 to be in the clear when this company sells on the SPOT market.
Once thre is a surplus in the market, anyone can undercut SPOT value with their inventory.
Race to the finish line.
Spot came down from 2.30 last week to 1.90ish today,
Could end-up the week at 1.70, and the month at 1.50/gallon.
The quarter is not over YET for folks who DID NOT LOCK-IT-IN by now.
In any case, look ahead to 4Q14 and 1Q15: Margins are not as high, plenty of corn,
and the train companies are in front of Congress, Mr Buffet is getting private visite
in his office by the Sec of USDA! Do count on a few trains moving the stuff around.
The question to ask is as follow: what is PEIX worth when ethanol is at $1.50 gallon,
and the other variable is running capacity 95,90, 85% during non-peak period?
Futures market not BIG enough to cover large volume. No risk takers ... no more banks holding the bag.
See today correction in spot, nearby months, and all the way into 2015.
Sorry... ADM has another strike against it as well:
o unrelated to above but in the totality a negative ( I think)
o their last pruchase was for some European assets
o With the euro going down ( up 130's tp 1.29), there will some
There might be some currency hedging there.... But we will have to wait to see ...
A Sell for me until ADM reacts to the ethanol price changes.
May be aorund low 40's, re-assess.
As fertilizer retailers, farmers and agronomists have been reporting in recent months, logistics are set to be the key driver of U.S. fertilizer prices once again this fall. Rabobank points to rail companies only having a limited numbers of cars available to ship potash out of Canada into the U.S. as well as the congested barge market making delivery through New Orleans "an unattractive alternative."
"In Rabobank's view, lower crop prices will not force farmers to radically reduce fertilizer application in the U.S. in the short term," the report said. "If farmers save anything on fertilizer application at all, this is most likely to concern P and K application (as was the case in 2008) but not N application."
Comments: RNF call will have a surprise or two.
Snt,... I usually do not answer to every tidbits inquiry. But when a new subject comes up, I try to enligthen.
California market is approx 1.2billion gallons. PEIX is 200mil. 1) there is 1B gallon supply outside of PEIX. So their mode of arrival into the market is mixed...
Second, anyone seppling on spot market only benefits the most when suppy is tight but suffers the most when there is a surplus. Risk goes up up other supplier being able to sell AHEAD OF YOU.
To Derkamp and to you : at the end of a quarter, with extra supply, one may finish the quarter NOT SELLING what you have ALREADY Produced. Taking on the cost and no revenue. DO this for 5million gallons out of 50mil for one quarter and you can see a very low net 3Q bottom line.
When this occurs, one liquidates the next quarter... just to keep the base plant running. Prices spiral down. $1.50 / gallon is in the picture by mid-4Q. Lowest cost producer will be the last one standing ( again)
Supply ( after summer demand) has caught with demand in the WEST
And Valero started a new 110mil plant...
Net, Spot prices in the West is @2.01, just 16c above Chicago spot.
Margins gettting narrower in the West.
Fture earnings slimmer than all he wild projections of 1Q-2Q
Basis Cost to this company is :transportation + carry + profits by supplier.
Go back to PR releases where the earnings are announced.
Company costs versus CME is provided.
Just note: my comments about basis are reported figures, not todays figures. Actual Basis for this company is always a surprise ( specially 2013 summer!)
Come off it with the RAIL story !
Do the math:
a) The Corn BASIS for the companies in the west is at $1.20 - $1.40 - $1.80 PER BUSHEL.
b) Divide the BASIS by 2.8 ( # gallons per bushel) and you get an extra COST of 42c/gallon
c) So then take the price of ethanol in the west to compare to the price of ethanol nationally: delta 30-32c more.
Conclusion: West has a DEFICIT of 8c ( more costly)...
The rail AND DISTANCE from the feedstock is the issue: more costly to make.
Costlier than what the market gives you on a continuous basis --- except when when the supply is really limited ( like 1Q14) and then prices can get outofwack.
Come Off the Rail issue! The issue is now between some regional farmers and their buyers.... but given the total supply of corn, there is PLENTY for ethanol plants in the heart of the corn belt.
As corn get s cheaper, the BASIS in the West gets disproportional.