Ethanol Running on Empty
by Tim Maverick (Wall Street Daily) Ethanol prices recently hit a four-year low, plunging 28% in September alone. The price on October 1 was $1.53 per gallon, the lowest price seen since June 2010! Back in March, I told readers why the $44-billion industry would face strong headwinds in 2014. The price drop was caused, in part, simply by too much supply.
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But there are three other big issues this commodity needs to get over before the market can recover.
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Under the original 2007 law, 14.4 billion gallons of ethanol were to be blended into the nation’s fuel this year. But many believe the EPA will lower that requirement to only 13 billion gallons.
This will most certainly dampen the industry’s profit.
Competition from Brazil is also pressuring the ethanol industry.
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A good bit of ethanol shipping from producers to export points is done by rail. However, last year’s intense winter caused by the polar vortex had rail shipments tied up in a knot. READ MORE and MORE (Lincoln Journal Star) and MORE (Ethanol Producer Magazine)
Excerpt from Lincoln Journal Star: …Last winter, rail service slowed to a crawl in North and South Dakota, Minnesota and Nebraska because of a combination of demand to move coal, grain and crude oil, combined with limited capacity and harsh weather.
During the worst of the shipping snarl, rail cars full of ethanol sat for days at the Green Plains ethanol production plant in Nebraska, waiting for an engine to power their delivery.
It created a bottleneck that slowed down production and lasted well into spring, much longer than usual winter slowdowns, said Steve Bleyl, executive vice president of ethanol marketing for Green Plains. …
“I’d like to tell you we’ve got a warm fuzzy feeling from BN(SF) or UP that says we have enough power or enough crews, but when the weather hits, I just don’t think they have enough,” Bleyl said.
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Oil and gas production from the Bakken formation in states such as North Dakota remains upward of a million barrels per day, more than double the 400,000 barrels the region produced just five years ago.
Plus, U.S. farmers are expected to bring in a record 14.5 billion bushels of corn.
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Concerns about delayed rail shipments prompted the U.S. Surface Transportation Board this month to order all Class I railroads to report performance and shipping figures. READ MORE
Excerpt from Ethanol Producer Magazine: … The weekly average dwell time at origin was 14.6 hours for grain unit train shipments, 26 hours for ethanol unit train ships, 10.5 hours for crude oil unit train shipments, and 4.4 hours for coal unit train shipments. According to the report 23 ethanol trains were held short of destination or scheduled interchange for longer than six hours. For grain unit trains it was 283. The weekly total number of loaded cars in revenue service that have not move in more than 120 hours was 52 for ethanol and 747 for grain. For empty cars is was 133 for ethanol and 1,017 for grain. READ MORE
