Ethanol and Corn

Published on: 14:49PM Oct 15, 2008
The chart of the week is a rough estimate of ethanol producer margins. The data does not include distiller grain sales or hedge positions however the data does support news that ethanol producer margins have been challenged in recent months. In July it was due to extremely inflated corn and natural gas prices. Recently however, it has been a different story. Corn and natural gas prices have fallen sharply since July but so have wholesale ethanol and crude oil prices. As I have discussed in previous notes, corn needs ethanol like ethanol needs corn. If ethanol producers are not profitable then corn will need to get to a level to make them profitable otherwise there could be a significant surge of available corn supplies on the market. Where will ethanol trend in the coming months? That likely depends on crude oil prices. And given the recent economic challenges, there is a lot of talk that crude could move 10-20% below current levels.   
 
 
These comments and data are provided for information purposes only and are not intended to be used for specific trading strategies.  Past financial results are not necessarily indicative of future performance.  Any examples given are strictly hypothetical and no representation is being made that a person will or is likely to achieve profits or losses similar to those examples.  Neither the information, nor any opinion expressed constitutes a solicitation to buy or sell futures or options on futures contracts or OTC products.  Covered parties (as defined below) shall not be liable for any direct, indirect, incidental, special or consequential damages of any kind, whatsoever (including attorney’s fees and lost profits or savings) in any way due to, resulting from, or arising in connection with this email, including it’s content, regardless of any negligence of the covered party including but not limited to technical inaccuracies and typographical errors.  “Covered Parties” is defined as American Restaurant Association Inc., ARA Trading and the employees of both companies. Commodity trading involves risks, and you should fully understand those risks before trading.
The chart of the week is a rough estimate of ethanol producer margins. The data does not include distiller grain sales or hedge positions however the data does support news that ethanol producer margins have been challenged in recent months. In July it was due to extremely inflated corn and natural gas prices. Recently however, it has been a different story. Corn and natural gas prices have fallen sharply since July but so have wholesale ethanol and crude oil prices. As I have discussed in previous notes, corn needs ethanol like ethanol needs corn. If ethanol producers are not profitable then corn will need to get to a level to make them profitable otherwise there could be a significant surge of available corn supplies on the market. Where will ethanol trend in the coming months? That likely depends on crude oil prices. And given the recent economic challenges, there is a lot of talk that crude could move 10-20% below current levels.   
 
Ethanolmargins 
These comments and data are provided for information purposes only and are not intended to be used for specific trading strategies.  Past financial results are not necessarily indicative of future performance.  Any examples given are strictly hypothetical and no representation is being made that a person will or is likely to achieve profits or losses similar to those examples.  Neither the information, nor any opinion expressed constitutes a solicitation to buy or sell futures or options on futures contracts or OTC products.  Covered parties (as defined below) shall not be liable for any direct, indirect, incidental, special or consequential damages of any kind, whatsoever (including attorney’s fees and lost profits or savings) in any way due to, resulting from, or arising in connection with this email, including it’s content, regardless of any negligence of the covered party including but not limited to technical inaccuracies and typographical errors.  “Covered Parties” is defined as American Restaurant Association Inc., ARA Trading and the employees of both companies. Commodity trading involves risks, and you should fully understand those risks before trading.