High Summer Corn Prices to Squeeze Ethanol
Woe to the ethanol makers out there, because higher corn prices this summer will mean even more shrinking profits for ethanol producers says a report from Texas A&M University. There’s also the potential for more variability in the price of corn this summer, because supply is relatively inelastic and worldwide demand is still high.
The rise in corn prices and volatility of such pricing will likely cause problems for those investing in ethanol plants such as AltraBiofuels, which plans to build an 84-million-gallon corn-ethanol plant or shareholders of Pacific Ethanol which recently said it would raise money after suspending plans to build another ethanol plant. The A&M report estimates that prices for corn this year will likely average $4.66 per bushel with 70 percent of the likely prices falling between $3.13 and $6.32 per bushel.
Given that current prices for ethanol are averaging about $2.20 per gallon in the Heartland and $2.30 on the West Coast, the expected average corn prices will be putting a squeeze on produces (see chart). Should a drought or other problem occur to lower yields ethanol producers might find themselves in the red. And that’s never a great place for a green company to be.
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[...] High Summer Corn Prices to Squeeze Ethanol: Corn-based ethanol production is beginning to be crushed under its own weight. Fuel demand for corn stocks is driving market speculation, with price-per-bushel futures averaging about $4.66. Since ethanol currently is going for $2.30 a gallon on the West Coast, producers will find it difficult to preserve profit margins. And that assumes a normal growing season, free from widespread drought or crop failures. (Earth2Tech) Stay up to date on green technology, gadgets & news by subscribing to EcoTech Daily’s RSS feed. var disqus_url = ‘http://ecotechdaily.com/2008/05/31/the-daily-five-saturday-31-may-2008/ ‘; var disqus_title = ‘The Daily Five: Saturday, 31 May, 2008′; var disqus_message = ‘Climate scientists reconcile a long-standing challenge to global warming predictions; space energy gets dragged out of the realm of sci-fi; and the ethanol industry pays the price for its own success.%0A’; View the entire comment thread. [...]
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