Ethanol plants are expected to ramp up production this spring after plant profitability recently reached the highest levels since 2011 and the end of the blender credit. This renewed profitability was due to higher gas prices, lower corn values and lower ethanol stocks from this winter.
Steve Knier, merchandiser for U.S. Commodities in Minneapolis, told DTN that in coming months, ethanol plants coming back online will likely be ramping up production and running as hard as possible to "make hay while the sun shines."
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"(Ethanol plants) are now in the black, so they will want to make as much profit as possible," he said. "With plants running very hard right now, they are using a lot of corn. There may not be enough to get through the summer," he said.
A shortage of corn could also have some serious implications for prices of dried distillers grains.
With more plants coming back online after scaling back or shutting down over the winter, the increased ethanol production will result in increased DDG production, most likely resulting in some downward trends in DDG prices.
On the other hand, if a corn shortage over the summer would cause a dip in ethanol production, DDG production would fall and likely send prices reeling once again. Although the DTN weekly DDG prices average has fallen more almost $40 from its September high of nearly $300 per ton, a cutback in plant production could push prices upward. This could likely happen if corn prices rise, as DDG prices tend to mirror the corn board.
Cheryl Anderson can be reached at Cheryl.firstname.lastname@example.org.