Ethanol profits in 2013 second highest on record

Source: by Christopher Doering, Des Moines Register • Posted: Tuesday, March 18, 2014

The average U.S. ethanol plant made a profit of $23 million last year, the second most profitable on record, as producers of the renewable fuel benefited from lower corn prices, according to a study by the University of Illinois.

Scott Irwin, an economist at the university, said profits last year were just short of the $25 million plant average high posted in 2007. It’s been a volatile ride for ethanol producers during the last few years as high corn prices in 2012, the result of the widespread U.S. drought, lead the average ethanol plant to lose $7.3 million. That forced many plants to close or roll back production. The average from 2007 to 2013 was a profit of $7.4 million, the study found.

“Recent headlines about biofuel policies paint a very negative picture of the biofuel industry,” said Irwin. “It might then be surprising to learn that ethanol producers over the last year have enjoyed one of their best periods of profitability ever. As a result, the ethanol production industry is on a much sounder financial footing after being ravaged by drought-related losses in 2012.”

U.S. ethanol producers are keeping a close watch on the Environmental Protection Agency which proposed lowering the amount of the corn-based fuel that the federal government would require to be blended into the gasoline supply in 2014. The renewable fuels industry has warned a cut to the country’s Renewable Fuel Standard, which would be the first ever for the mandate, would slow growth for the sector, especially for ethanol made from grasses, wood chips and other crop residue. A decision from the EPA is expected this spring.

Iowa, the country’s largest ethanol producer, has 42 refineries capable of producing over 3.8 billion gallons annually, with three cellulosic ethanol facilities currently under construction.

The U.S. Agriculture Department has forecast a corn crop in 2014 of nearly 14 billion bushels on 92 million acres. Strong production would further replenish low global stockpiles, putting additional pressure on prices that plunged 40 percent last year as output rebounded from the drought-ravaged 2012.

Corn, used in everything from animal feed to ethanol, is forecast to average $3.90 a bushel in the coming marketing year, a decline of 60 cents from the prior year. If those forecasts are accurate, prices would be the lowest since the 2009-2010 marketing year. Corn is currently trading for about $4.80 a bushel.