Ethanol Blog

Gas Prices, Threat to DDG Exports May Affect Ethanol Industry

Cheryl Anderson
By  Cheryl Anderson , DTN Staff Reporter

The slide in gasoline prices is pressuring ethanol prices in Nebraska and other Midwest states. Coupled with other factors such as possible decreased purchases of dried distillers grains from China, this will likely mean some struggles for the ethanol sector nationwide, according to an article by the Grand Island Independent (http://bit.ly/…).

Richard Perrin, agricultural economist at the University of Nebraska-Lincoln, said that predictions of weaker crops and higher corn prices may result in even more worries about profit margins for ethanol producers in coming months.

According to a report from the Colorado-based CoBank, "ethanol profitability will face headwinds in the coming 12 to 18 months from persistent pressure on ethanol prices, modest increases in ethanol production and capacity, flat domestic demand, and the risk that (distillers grains) exports to China will decrease."

The bank's report stressed that the industry need not be overly-alarmed by reports of financial stress and predicted ethanol prices will likely be volatile for only the near future.

CoBank said, "“Following 18 months of record earnings, the U.S. ethanol industry has rebalanced in 2015. As energy prices collapsed in late 2014, so did ethanol prices and plant margins. However, ethanol’s supply/demand has been well balanced in 2015.”

Cheryl Anderson can be reached at Cheryl.anderson@dtn.com.

(ES)

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