← Autodidact Archive · Original Dissent · Okiereddust
Thread ID: 19018 | Posts: 4 | Started: 2005-07-07
2005-07-07 09:02 | User Profile
[URL=http://desmoinesregister.com/apps/pbcs.dll/article?AID=/20050403/BUSINESS01/504030320/1029/archive]Low prices hit ethanol[/URL]
No one predicts wholesale failures, but Iowa ethanol producers are worried
By JERRY PERKINS REGISTER FARM EDITOR April 3, 2005 Wholesale prices for ethanol are sinking like a stone, down 20 percent since Sept. 30, while the cost of a gallon of gasoline, including gas blended with ethanol, has risen about the same amount in the same period.
The plummeting wholesale price of ethanol is critical for the profitability of Iowa's 14 ethanol-producing plants and, perhaps, even more important for the 13 plants that are in the planning stage or under construction. While no one is predicting wholesale failures in the fledgling ethanol industry, there are alarm bells starting to sound about the lower prices.
"It's really going to start to sting," said Bernie Punt , general manager of the Siouxland Energy and Livestock Cooperative in Sioux Center, which owns a 23-million-gallon-a-year ethanol plant.
"It's catching everyone off guard," he said. "People just can't believe it's possible."
Those who watch the ethanol market say the lower prices might last another year. Those observers disagree over what is to blame for the lower prices for ethanol.
Punt said the ethanol price decline is especially galling because of record high gasoline prices. Historically, ethanol prices have moved up and down with gasoline prices, but in the past four months, ethanol prices have dropped while gasoline prices have risen.
There are now 81 ethanol plants in 20 states, the fuels association said. The plants consumed 1.25 billion bushels of corn last year, or 13 percent of the U.S. corn crop.
"There's no reason for the ethanol market to go this low," Punt said.
The blame, he contends, rests squarely with the major oil companies that see ethanol producers as competitors.
"They don't like to see us taking their market," said Punt. "They don't like the growth of the ethanol industry."
But others who watch the ethanol market say the price decline is a simple matter of supply and demand - too much ethanol and not enough customers.
Spencer Kelly , reporter-editor for the Oil Price Information Service's Fuel Ethanol Report, said the reason for the ethanol price decline is Economics 101.
"Plain and simple, it's supply and demand," said Kelly. "There are a lot of ethanol producers coming on line, a lot have come on line and some have expanded their plants."
Meanwhile, no new markets for ethanol have opened up recently.
A year ago, California, New York and Connecticut offered huge new markets for ethanol, Kelly said. Since then, the opening of potential new markets in Atlanta and Baton Rouge, La., has been tied up in court challenges.
"The drop in ethanol prices hasn't reached the point where most of the ethanol plants are losing money," Kelly said. "Of course, the price of corn has dropped, too, so the plants' cost of production also is down."
Some marginally profitable ethanol plants might have to shut down if ethanol prices stay low, Kelly said, but only temporarily.
"I haven't heard of anyone shutting down or even cutting back," he said.
Farmers who have invested in constructing ethanol plants around Iowa say they are not fazed by the downturn in ethanol prices - yet.
Lincolnway Energy LLC raised $38 million last year from investors to build a 50-million-gallon-a-year plant in Nevada. William Couser, Lincolnway Energy's president, said the plant should be up and running in a year.
"We knew there would be challenges," said Couser, who feeds cattle near Nevada.
Carl Johnson, vice chairman of Midwest Grain Processors in Lakota, said the cooperative raised $17 million from investors to expand the Lakota plant from 50 million gallons a year to 100 million gallons. The equity offering closed in January, he said, before the big price decline hit the ethanol industry.
Last year, Johnson said, Midwest Grain Processors paid almost $5 million from its profits, or 37 cents a share, to its 1,000 member-owners. Next year's payout might not be that large because of low ethanol prices.
Punt said he prepared his member-owners for a shock when they held their annual meeting last week .
"I told them, 'Guys, you better sit down,' " he said.
Pete Nessler, director of the renewable fuels group for FCStone Group in West Des Moines, said lower prices for ethanol might mean a boost for E85, a blend of 85 percent ethanol and 15 percent gasoline.
Low ethanol prices mean E85 could sell for 20 cents a gallon less than regular unleaded gas, Nessler said.
"Right now, we have to really push for E85," he said.
Lucy Norton, director of marketing for the Iowa Corn Promotion Board, said E85 is now available at only 18 locations in Iowa.
"What we need is a better understanding of E85 among retailers and blenders," she said.
A blenders' tax credit that takes effect July 1 will change the economics of E85, Norton said, giving blenders a 51-cent-a-gallon tax break.
(Interesting. Worried about high fuel prices? Here are some people worried about low*fuel prices. Although - hint, hint - its people who aren't connected, but are competing in a way, albeit small, with the big oil companies.
You'd think the Bush administration would be doing everything in its power to boost alternative fuels in this time of growing energy shortage. But no, they're letting the big oil companies put a big damper on, if not wipe out (not for lack of trying though) the infant ethanol industry. The oil companies and of course neocons obviously wish us to continue our dependence on mideast oil - the oilcons because they're economically set up for it. the neocons because they want another reason to ensure we remain fully committed and tied down to the middle east)
Obviously anyone thinking the Bush administration isn't in the pockets of the big oil companies is crazy*
2005-07-07 12:08 | User Profile
good! that will make biodiesel cheaper to use [url]http://journeytoforever.org/biodiesel_make.html#process[/url]
i only wish i was using it, thats the plan though...
2005-07-07 15:09 | User Profile
[QUOTE=JoseyWales]good! that will make biodiesel cheaper to use [url]http://journeytoforever.org/biodiesel_make.html#process[/url]
i only wish i was using it, thats the plan though...[/QUOTE]
Can you really run a diesel motor truck on that stuff? I'd try it, but I'm a little nervous about taking chances with the motor of my $40,000 pick up truck.
2005-07-07 17:33 | User Profile
[QUOTE=OPERA96]Can you really run a diesel motor truck on that stuff? I'd try it, but I'm a little nervous about taking chances with the motor of my $40,000 pick up truck.[/QUOTE]Running 10% ethanol is a no-brainer. I don't know about biodiesel - from what I understand its basically vegetable oil.
I would definitely have some second thoughts if I was going to run my $40,000 diesel on it. And take a second and third look at all the tech manuals. From what I read, (unlike of course 10% ethanol) some modifications are advisable first with a lot of engines.