Ethanol Blend Rates and What That Could Mean To Corn Prices
Mar 21, 2012
There have been some rumors circulating the past couple of days that the USDA maybe getting ready to bump the ethanol/corn conversion rate higher. I have heard no confirmation, but talk has been circulating for sometime that the current USDA conversion rate of about 2.7 gallons of ethanol per bushel of corn is simply too low and is going to soon be adjusted higher. The higher quality of last year’s corn crop, and more efficient ethanol plant practices seem to be causing the trade to think the conversion rate could actually be as high as 2.9 gallons per bushel. Essentially giving you a much bigger bang per bushel. Some will tell you we could actually be producing the same number of gallons the USDA is currently estimating, but we have in fact used 400 million fewer bushels of corn to do it. As you can imagine this would certainly be considered a major curve ball to the old crop balance sheets and would dramatically change the song and dance the trade has been marching to as of late. Make sure you are in a position to handle a pitch of this magnitude. I am afraid it could be a real game changer if it were to be thrown at just the right time. Remember, the name of our position on the field is "risk manager." Our primary job is to eliminate and reduce unnecessary "risk." Be smart and constantly be searching for ways to reduce your exposure and to avoid unexpected sharp objects that might find their way onto our marketing path.
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