Ethanol Makers Losing Money Due to Hurricane Ike Damage and Rising Corn Prices
U.S. ethanol producers are being hit by a one-two punch: Hurricane Ike-related damage is softening demand for the alternative fuel while rising corn prices are increasing operating costs.
Last week, Hurricane Ike left many US oil refineries hobbled in its wake — including the nation’s largest biodiesel refinery. As a result, oil production is down.
Demand for ethanol in the US is closely tied to oil production because of the federal ethanol-gasoline blending mandate. So as oil production has fallen, so has ethanol demand.
At the same time as Hurricane Ike was downing oil refineries, corn futures — essentially the betting on whether or not the price of corn will rise or fall in the coming months — have risen dramatically due to the volatile financial markets and a general upward trend.
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When you combine these two issues — weakening demand and rising raw materials costs — with the fact that US production capacity for ethanol has increased by 60% since this time last year, it seems that it’ll be a relatively long time before making ethanol becomes a profitable venture again.
In a Reuters article, Rick Kment, an analyst at DTN, says that ethanol production will be a money loser for the next 6-12 months and most ethanol producers will probably take a 25 cent per gallon hit during that time.
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Image Credits: Corn field from antaean’s Flickr photostream. Oil refinery from hassan abdel-rahman’s Flickr photostream. Both used under a Creative Commons license.
Source: Reuters (via Biofuels Digest)
The real problem is that the old two products from processing corn business model no longer works.
Making only Ethanol and Brewers grains for cattle feed will no longer pay for the bushel of corn.
Today you need to also produce and profitably market 20 or 30 other co-products; food ingredients, phamaceuticals, industrial chemicals, diesel fuel and animal feed ingredients from that bushel of corn.
Only “Real Wealth” like corn production in U.S.A. in jeopardy? Over imported oil? What great economic folly is this? Develop proper unadulterated Ethanol specific engines for at the very least the farming equipment used to produce the corn, the ethanol, then for practical economy, light trucks for farm goods deliveries, work, and in the interests of national food security, re-work factory farms to produce fuel gas from offal and manures, as well as a top-soil ameliorating fertilizer product for the burned out fields of America - Do this to save the now dying and very precious food supplies to the urban areas, and do it before the inevitable collapse with all labor going to Asia and the economic breakdown that will cause! America is in the middle of catastrophic, convulsive, dynamic, mind-bending paradigm shift! We absolutely must, at all costs defend the generation of “real wealth” in America, corn fields, producing fields of any sort, Clean water-ways, recycled bio-gassed sewage, composted wastes of all sorts, we are being sent back to the land by a great Asian phenomenon, who’s duration and powers we can only imagine! We must yield, be flexible and change and adapt away from our unsustainable position! We are being morphed by market pressures, oil prices, scarcity, population growth and proficiencies in other lands, modern communications, education in other lands, exhaustion of the old world paradigm, our own physical body sizes and requirements for life, global warming/cooling as you wish, other, Muslim and Buddhist philosophies of life, by larger populations, Science and technology advances, even alignment of the stars if you will! The land and its riches, with the recent advent of Solar, Wind, Wave, Tidal, Hydro, and Geo -thermal perpetual fuel-less power have been added to the list! America! Rich, and rich for change, will we grow in application of common sense changes or will we die away fixated on Elvis, Harley Davidson’s, Barbie Dolls, McMansions, SUV’s, Fast Foods, high Meat consumption and great fat asses we can hardly carry without back-stresses anyway? Your call America!