Even with low corn prices, an energy expert says ethanol may have a tall hill to climb in terms of profitability.
A narrowing spread between gasoline futures and ethanol could affect demand for ethanol. Peter Meyer, senior director of agricultural commodities with PIRA Energy Group, says both gasoline prices and crude oil prices have come down dramatically.
“Plus, we are entering a slow demand period for gasoline,” he says. “Summer is when we have most of our gasoline demand.”
He says that even with corn prices being down, those factors have weighed on the ethanol profitability at the moment.
Even though the 2014 corn harvest still has a long ways to go, Meyer says, analysts are already debating how 2015 corn acres could affect prices in the future.
“It’s going to be interesting to see how the world corn prices work into the acreage mix for next year,” he says. “If we start to reduce our corn acres, some ethanol plants may be struggling to get enough product to make ethanol. This year, that won’t be a problem. But, next year could be a problem.”