Have a GREAT Saturday readers...........
The bad news for the ethanol industry continues. More ethanol plants shutdown or reduce rates. The new worry is about droughts in several corn producing states that may not only reduce the corn supply, but also raise corn prices. That's also bad for us consumers since the price of all food products made from corn continues to rise and rise as nearly 50% of the corn grown in the US is now to make "corn gas".
And they continue to put their bets on 15% ethanol gasoline as their savior. But, there remains many, many issues to overcome before we see "E-15" in stations. Retailers DON'T WANT E-15 due to enormous liability issues.
Ethanol plants cutting production [American News, Aberdeen,
S.D.]
By
Jeff Natalie-Lees, American News, Aberdeen, S.D. McClatchy-Tribune Information
Services
July
06--
An oversupply
of ethanol and skyrocketing corn prices are causing many ethanol plants to cut
back production.
Valero Energy
Corp., a major petroleum company that also operates 10 ethanol plants, has
temporarily shut down two plants, because the cost of making ethanol was more
than its selling price. The plants are in Albion, Neb., and Linden, Ind.
South Dakota
ethanol plants are feeling the pinch, but those near Aberdeen are maintaining
their production levels.
"There
have been pretty tough margins in the ethanol industry the last six months, but
we are not considering cutting back production," said Tom Hitchcock, CEO
at Redfield Energy. The plant makes about 55 million gallons of ethanol a year.
Redfield Energy
may be in better shape then some ethanol plants, he said.
"Each facility
has its own set of circumstances and those that are shutting down temporarily
probably have poor plant economics or have a lack of corn in their area,
Hitchcock said.
The Glacial
Lakes Energy ethanol plants in Mina and Watertown have considered cutting back
production, but have not done so yet. "We have looked at that possibility a
number of times," said Jim Seurer, Glacial Lakes CEO. "But so far we
have not done it." One plan is to cut production by 20 percent, he said. Glacial
Lakes also has the capability of idling one of its two 50-million gallon
capacity plants in Watertown while letting the other Watertown plant and the
Mina plant maintain full production. "Right now it is too early to say if
we will need to do any of that," Seurer said. "We are monitoring the
situation."
Representatives
from the Poet Biorefining Plant in Groton said that the company does not
discuss production amounts. Kelly Kjelden, general manager at Groton, said Poet has
diversified its product line by making corn oil at many of its plants,
including Groton, and continues to sell its dried distiller's grain. The
company is strong and can weather changing market conditions, he said.
The biggest
concern right now is that drought in parts of the corn belt will further drive
up commodity prices. Corn futures on the Chicago Board of Trade have gone up nearly
$1.50 a bushel in the last two weeks, Hitchcock said.
Drought
conditions in Indiana, Illinois and parts of Iowa will likely decrease overall
corn production in the country. As of Tuesday, corn futures on the Chicago
Board of Trade were $6.66 a bushel. Some analysts are predicting corn will go
up to $7.25 a bushel. While that is good news for farmers that can harvest a crop, it
increases costs for the 95 percent of ethanol plants that use corn for making
bio-fuel. Wholesale ethanol prices have not kept pace with increased corn
costs.
Continued
uneasiness about the world economy and less driving by American consumers have
decreased demand for ethanol. Companies that buy ethanol have a good supply on
hand. Many of them went on a spending spree in 2011 before the blender ethanol
tax credit expired Jan. 1. They are still working off those inventories.
"When you
compare the market dynamics to last year, we are in a much different
situation," Hitchcock said. "Ethanol prices are down and corn prices
are up." The wholesale ethanol price is $2.34 a gallon, 28 cents less per
gallon than it was in November. Corn is up 39 cents compared to its November price.
The export
market has also weakened.
A year ago, the
Glacial Lakes plant in Mina was exporting its ethanol to Brazil because its
sugar cane crop had failed. The Mina plant discontinued exporting to Brazil two
months ago. "We had a good run of exports to Brazil, about 120 to 130
million gallons, but demand there has softened," Seurer said. "It
would be good news for us if we could export again."
Demand for
ethanol remains stagnant because of an Environmental Protection Agency rule
allowing only a 10 percent blend of ethanol in fuel for older vehicles. While
the EPA has approved a 15 percent blend for models built between 2001 and 2012,
it has not approved it for older models. Gas stations are reluctant to change
from E-10 to E-15 until all models are approved. When ethanol plants --
like those owned by Valero -- go off-line, it helps equalize supply and
demand. The
55 million gallons of ethanol produced by the Redfield will someday no longer
be counted in the nationwide supply.
The plant is
scheduled to undergo a major retro-fit that will allow it to produce
isobutanol, a fuel with more diverse uses than ethanol. Construction is
expected to begin in the fall or early winter, Hitchcock said.
Companies in
the ethanol industry continue to look for ways to compete in a changing
marketplace.
The best thing
that could happen for the industry would be for EPA to support E-15 use in all
vehicles, Seurer said. That would potentially increase demand 50 percent, he
said.
"Pete" Landry.........comments welcome at way2gopete@yahoo.com
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