GRAND FORKS, ND--(Marketwired - Apr 26, 2013) - News of ethanol plant restarts and improved profitability are building optimism about the state of the ethanol industry in recent weeks. "It would appear that there is an opportunity -- at least in the near term -- to stay in the black in terms of profitability," said Nebraska Ethanol Board administrator Todd Sneller.
Idled Ethanol Plants Restart Production
Sneller said most of the ethanol plants that were temporarily idled are now back in production. Specific examples include the April 23 announcement from Poet LLC that its Macon, Mo., facility had resumed ethanol production after temporarily idling in early February. In March, Valero Energy Corp. restarted all three of the plants it idled in mid-2012. Finally, two Abengoa Bioenergy ethanol plants were restarted in February, after sitting idle for roughly four weeks.
Ethanol Production on the Rise
U.S. ethanol production rose to a two-week high as corn costs eased. Ethanol production averaged 853,000 barrels per day, a 21,000 barrel per day increase from the week before, according to the latest U.S. Energy Information Administration data. It was the second highest weekly average of the year, the Renewable Fuels Association said. Ethanol stocks were also up slightly at 17.6 million barrels, a 0.5 percent increase from the previous week. Further, the EIA said in its April 2013 issue of its Short-Term Energy and Summer Fuels Outlook that ethanol production is expected to recover to pre-drought levels after mid-year. Overall ethanol production is expected to average 850,000 barrels per day for the year and increase to an average of 920,000 barrels per day in 2014.
An Atlas Markets daily price indication email illustrates improved margins at ethanol plants. Looking at information from April 24, the ethanol/corn crush for the May contract was at 24 cents, June contract 17 cents, quarter three 23.5 cents and quarter four 7 cents. In comparison, Atlas Market numbers from March 26 put the April contract at negative 0.05 cents, May 2 cents, June negative 4.5 cents, quarter three 20.5 cents and quarter four 4.5 cents.
Sneller pointed to strengthening ethanol prices, reduced feedstock costs, export demand for ethanol and strong demand for distillers grains as positive factors. "That has been helpful in terms of propping up price and putting some strength back in the market," he said.
New Technologies and Improved Efficiencies Help Margins
In addition, ethanol producers have worked to improve efficiencies and adopt new technologies, including installation of corn oil extraction systems. He also mentioned the use of new hybrid corn varieties and enzyme technologies for better ethanol yield. "Those factors in combination and some cases, individually, have been responsible for improved margins," he said.
"In Nebraska, which is second only to Iowa in ethanol production capacity, plants that were idled had fairly short downtimes and employees were not laid off," Sneller said. "The time was used to implement technology improvements or to work on compliance, annual inspections or maintenance." He added that it's not just the ethanol industry that is thankful for improved ethanol profitability. "It's very clear to those communities and those states that host plants that when these plants were operating, not only the ethanol sector but the agricultural sector in its entirety, is functioning in a far more efficient, far more profitable manner," he said.
These topics and more will be discussed the 29th Annual Fuel Ethanol Workshop & Expo, June 10-13, in St. Louis, Mo. To learn more visit: www.fuelethanolworkshop.com
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