U.S. Weekly Ethanol Margins Hit 2017 High as Ethanol Prices Rise, Corn Falls

Source: By Jordan Godwin, OPIS • Posted: Wednesday, March 29, 2017

Ethanol margins at a representative Iowa ethanol plant in the week ended Friday rose sharply from the previous week as ethanol prices strengthened and feedstock corn values tumbled, Iowa State University’s Center for Agricultural and Rural Development (CARD) said Monday in its weekly assessment.

The return over operating costs at a typical dry-mill ethanol plant in the week ended Friday reached 26.26cts/gal, up 13.87cts from the prior week to the highest level since Dec. 30 when they were at 38.65cts/gal. Margins were 16.74cts above year-ago levels as returns from ethanol sales continued to support profits.

The average Iowa ethanol price firmed to $1.455/gal, up 8.66cts from a week earlier and 15.1cts above where they were last year at this time.

At the same time, corn prices fell 19.94cts in the week ended Friday to $3.21/bu, CARD data showed. Corn prices are down 15.99cts from a year ago.

The ethanol and corn movements were enough to offset slightly higher natural gas prices. The average natural gas cost per gallon of ethanol rose 12.8cts week on week to $4.076/MMBtu, $1.228/MMBtu above the year-ago level, CARD said.

Return over operating costs is one measure of ethanol production’s profitability. CARD’s model calculates the difference between the revenue from ethanol plant outputs such as ethanol and dried distillers grains with solubles (DDGS) and the costs of variable production inputs (corn, natural gas and other costs such as enzymes, labor, electricity and water), CARD said.

CARD’s corn price is based on the daily nearby futures prices in Chicago plus an Iowa corn basis, which is the same approach for ethanol where an Iowa basis is added to the nearby futures contract in Chicago.