Posted on 12/13/2013 6:17:10 AM PST by thackney
Expectations for a record corn harvest in 2013 have helped lower corn prices since this summer, improving ethanol production margins and spurring an increase in the supply of ethanol.
During the 2012 corn-growing season, the United States experienced the most severe and far-reaching drought since the 1950s. By late August 2012, approximately 85% of the corn grown in the United States was located in a drought area, according to U.S. Department of Agriculture's (USDA) World Agricultural Outlook Board. A projected 2012 record crop of 14.8 billion bushels of corn dwindled to a final production level of 10.8 billion bushels by the end of last year's harvest period.
Abundant snow and rainfall in late winter and early spring revived prime corn-growing land. For 2013, the USDA is predicting a record-high corn crop of 14.0 billion bushels, a 30% increase over 2012. Much of the United States is still experiencing drought in 2013, but large portions of the Midwest avoided prolonged drought during the critical growing months.
The ethanol margin, the difference between the market price of ethanol and its cost of production adjusted by the value of co-products, is a measure of the profitability of producing ethanol. Between October 2012 and January 2013, the ethanol margin for producers was close to zero. The recent reduction in corn prices had a major impact on the profitability of ethanol production, because purchased corn is by far the largest cost incurred by ethanol producers. On average, one bushel of corn can be used to produce 2.8 gallons of ethanol.
Between January and November 2013, corn prices fell from about $7.50 per bushel to below $4.50 per bushel. A $3 reduction in the price of a bushel of corn translates into a roughly $1.08 reduction in the cost of ethanol production. While ethanol prices have also declined, ethanol producer margins have risen above $0.50 per gallon in recent months.
Improved margins have incentivized greater levels of ethanol production, with output recovering to pre-drought levels. At the same time, lower prices have made ethanol more economically attractive for refinery blending, and output of ethanol-blended gasoline has risen. Net use of ethanol by refiners and blenders reached an all-time high of 884,000 barrels per day in August 2013.
ethanol ping
And Merry Christmas to you and your family and your cows.
;-)
All of which would be fine if the weather and the free market were determining use of ethanol.
Government subsidies and mandates distort the market beyond all recognition.
Yes sir
Is chart # 2 telling me that ethanol producers are selling it for 90 cents per gallon?
The ethanol margin, the difference between the market price of ethanol and its cost of production adjusted by the value of co-products, is a measure of the profitability of producing ethanol.
90¢ profit per gallon.
Thank you.
By definition, per-gallon returns over variable costs plus variable costs equals the price of ethanol. The chart below shows how the price of ethanol is split between the various cost components—the net cost of corn in ethanol (corn costs less distillers grains value) and other operating costs (includes the cost of natural gas)—and returns over variable costs. A positive operating return does not necessarily imply profits because other costs, such as plant financing, and returns to capital, must be taken into account. But a positive operating return does signal the potential for profits in the industry. The horizontal line (at $0.25 per gallon) attempts to capture the costs of capital and other fixed costs. Profits are implied under the current set of assumptions when operating returns exceed the horizontal line.
Maybe a good time to build another still ?
Cows are less well-fed because of the amount of corn taken from their diet that goes toward ethanol production makes them more dependent on pasture and hay sources.
Now, there are certain advantages to grass-fed beef, but it does take up a vast expanse of land, land that is otherwise too marginal for other agricultural production, as too steep or too subject to erosion for crop cultivation. In terms of beef produced per acre of harvested crop, corn and soybeans are way ahead of practically every other crop. The advantage of either hay or grass is that little or no cultivation is required, and in the case of grass, the cattle do the harvesting. Grassland can be harvested for hay, providing for winter forage that would be an absolute necessity in most areas where there is chilling cold weather and snow cover, or subject to extended drought.
The REAL costs of ethanol production from corn would result in its economic infeasibility, were it not subsidized. If ethanol is of such benefit for motor fuel, it could be and is produced much more cheaply by using a fraction of natural gas, ethylene, and combining it with water in the presence of a catalyst. But that would not benefit in any way the interests of agribusiness and major producers of the corn as grain.
But this is not a rational world.
I don't think that is a true average of the industry. Nor am I convinced corn is a better feed than the DDG and pasture/hay.
I do not support the ethanol mandate and I'm glad to see the direct subsidy gone. But as you said, there are advantages to grass-fed beef.
Food for Fuel seems a bit unethical to me.
Drill Baby Drill !!
My cows, by the way, say hay.
Ruminants don't digest raw corn well at all. While once upon a time the undigested corn in bovine manure was directly eaten by hogs and, in turn, the undigested corn in hog manure was directly eaten by chickens, that's not how livestock is fed in this country anymore.
The only nutrient removed from raw corn by distillation is the starch. The spent distiller's corn (usually in the form of distillers wet grain or distillers dried grain with solubles) makes a very high quality animal which is easily digested.
Corn fed to cattle is milled, in the form of grist, using the WHOLE ear, cob and grain, which varies in mix, but includes a protein supplement (soybean oil meal, linseed meal, even urea), plus minerals, and in certain instances, antibiotics.
I know. Over the years I had hauled TONS of this to grist mills, or dumped it into tractor-powered hammer mills or mixer-mills, and fed it out by the shovelful thousands of times. Cows cannot digest unmilled corn grain. But they do great on ground corn cobs.
And whole-plant corn silage makes excellent roughage, that is the entire stalk, ears and leaves, all chopped to about 3/4 inch long, and allowed to ferment in oxygen-free environment, essentially pickling the plant material. Discarding the entire rest of the plant to make ethanol from the grain alone is wasteful in so many ways, if it is only to get the dried distillers’ grains.
Who says you can’t raise cattle on corn as primary feed?
You realize that corn is at best a mediocre feed for cows? It’s mostly a compromise feed because soy and other grains are far more expensive. That’s why you can’t feed a cow on pure corn, as you will get a very inferior beef. Most farmers feed their cows on at minimum 2/3 grass or hay and finish out in corn to bump their finish weight up without too much marbling.
DDG is in reality superior to corn, because if the stillage is not remixed back in (stillage, or the S in DDGS is the fat and remaining sugars), it’s practically pure protein and can be fed at higher rates due to less fat content. It is a myth that were are burning corn for food, human or animal.
That said, I despise the now gone subsidy and mandate for ethanol. We do have a problem of what to do with so much corn however. What needs to be done is to come up with tech that separates the fat, sugar, and protein up front, and let’s the sugar be fermented into whatever.
And IMO, whatever should NOT be ethanol. There are far more profitable agrichemicals we could be fermenting. Do things that way would also allow farmers to plant other crops besides corn on soils that don’t support it well.
But as you said, it’s not a rational world.
Does that chart say the fuel blenders are paying $2.50/gallon for the ethanol?
It shows margins (profits) not full prices for ethanol.
Insanity is a celebration of the abundance of ETHANOL, a food product being used in a fuel that has caused literally hundreds of MILLIONS of dollars damage to countless thousands of small engines of all types around the country.
This also includes the terrible and dangerous damage to the fuel systems and tanks is thousands of boats, both sail and power. (Sail boats also have engines)
I repeat, a new addition to the definition of insanity.
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