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Ethanol futures jumped to a nine-month high, gaining more than 24 other commodities today

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Not Good News for consumers..

 

 

 

 

 

Ethanol futures jumped to a nine-month high, gaining more than 24 other commodities today, amid a shortage of rail cars and a decline in U.S. inventories.
 
Prices have risen 42 percent in 2014. Producers are being asked to pay a “fat” premium of as much as $3,000 to reserve a rail car, the primary mode of transport for the fuel, said Steve Wagner, a market analyst for CHS Hedging Inc.
 
The frigid winter and competition for space are making it harder to move the fuel. Inventories fell for a fourth week, according to a government report today.
 
Some ethanol plants have been waiting for 35, 40 days for a rail car,” Wagner said in a telephone interview from Inver Grove Heights, Minnesota. “You can’t get cars and everybody is unhappy.”
 
Denatured ethanol for April delivery rose 13.7 cents, or 5.3 percent, to settle at $2.706 a gallon on the Chicago Board of Trade, the highest close since June 3. Ethanol on the New York cash market soared to the highest price since 2006.
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Ethanol’s discount to gasoline narrowed to 16.28 cents a gallon from 33.38 cents yesterday and 87.48 cents at the end of last year, data compiled by Bloomberg show.
 
Gasoline for April fell 3.4 cents, or 1.2 percent, to $2.8688 a gallon on the New York Mercantile Exchange. The futures cover reformulated gasoline, made to be blended with ethanol before delivery to filling stations.
 
Ethanol Output
 
An increase in production in the week ended March 14 didn’t keep inventories from slipping, U.S. Energy Information Administration data showed today. Output grew 2.5 percent to 891,000 barrels a day. Inventories dropped 631,000 barrels to 15.3 million, the lowest since Nov. 29 and 17 percent below the year-earlier level.
 
U.S. stockpiles are equal to 17 days of consumption, down from 19 days a month ago, data compiled by Bloomberg Industries show.
 
Margins to produce ethanol are still good, said Renan Pimenta, a Campinas, Brazil-based analyst for FCStone Inc. The crush margin, or the cost difference between ethanol and the corn to make it, advanced to 69 cents from 64 cents yesterday.
 
“Margins are good, but distillers can’t get the ethanol out to markets,” Pimenta said. “The result is some plants are temporarily idling, others reducing capacity and all these things are coming together.”
 
Cash Prices
 
Ethanol gained in all major cash markets. In New York, a gallon was up 49 cents to $4, the highest since June 30, 2006. It climbed 39.5 cents to $3.025 in Chicago, 55 cents to $3.80 on the Gulf Coast and 30 cents to $3.80 on the West Coast.
 
“Rail logistics issues continued to complicate ethanol movements to both coasts,” Geoff Cooper, chief economist at the industry group Renewable Fuels Association, said in an e-mailed report today.
 
Demand in the U.S. measured by ethanol refinery and blender inputs advanced 0.5 percent to 845,000 barrels a day, a two-week high, the EIA said.
 
Exports to countries such as Brazil, Canada and Philippines are expected to rise to 600 million to 1 billion gallons this year, according to a study by Seth Meyer, a senior economist with the U.S. Department of Agriculture, and Nick Paulson, with the University of Illinois. That compares with 621.6 million gallons in 2013.
 
The U.S. tracks compliance with ethanol consumption mandates with Renewable Identification Numbers, certificates attached to each gallon of biofuel that can be traded among refiners. Corn-based RINs for 2014 rose 1.5 cents to 47 cents, data compiled by Bloomberg show.
 

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Or is this a Gov Christie bridge type situation .. ?

Wouldn't surprise me at all. Something else interesting for me---I bought 100 shares of Green Plains Ethanol back in 2007 for $19.65 and it got as low as 2 something. Today I sold it for $30---will be interesting to see if it keeps skyrocketing. Wish I'd bought more but I had a lot more Vera Sun and that went belly up.

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they had been saying back a few weeks ago (during the "global warming" inspired "polar vortex"...) that the bad weather was causing rail shipments to be delayed, and that this was creating a backlog that would take several weeks to catch up on... I read where every railroad in the country was delaying the retirement and servicing of engines, and even pulling retired engins back into service in an attempt to help them get caught back up.

 

Based on these things, I can't see this STILL being the problem.

 

I would think that if there is THIS much ethanol produced in Iowa, Nebraska, Minnesota... and since we are the furthest from the major markets, and they are having problems moving the ethanol, that WE (western ethanol belt) should be seeing ethanol selling at a discount due to the local glut in the market.

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does that mean that the distribution company (yellow hose) is loosing money on this deal big time, hence not going to make it through this pinch in the market?

 

You know, with the prices the way there are, this COULD possibly attract more and more stations to sign up, and more customers to get hooked on the good, clean, high octane domestic stuff!

 

If they can afford to do this, it could be a GREAT time to lock in a huge distribution network and VERY loyal consumers.

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It's hard to say, as there isn't a lot I know about the logistics and the financial aspect of it. I know that the costs have been hedged by the company.

 

Another thing to keep in mind is that the price at rack is, from my experience, rarely the actual cost to the plant. I don't know exactly what the cost of producing a gallon of ethanol or E85 is to Carbon Green BioEnergy, but I can promise you it isn't $2.80/gallon. The ethanol plants can choose to sell at whatever price they want (as long as it's at least within reason to the market), regardless of what the Chicago spot is doing.

 

Now if input costs increase... that's another issue. Corn however, really hasn't increased on Chicago spot much at all since the start of the month.

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Found this story this evening, courtesy of the Sugarcane Blog and Bloomberg:

 

Ethanol Futures Rise to Highest in Two Years on Logistics Jam

By Lucia Kassai  Mar 20, 2014 3:58 PM ET 

 

Ethanol futures rose to the highest price in more than two years as another U.S. cold snap may worsen a shortage of rail cars for moving the product to the main consumer markets.

Denatured ethanol for April delivery gained 9.5 cents, or 3.5 percent, to settle at $2.801 a gallon on the Chicago Board of Trade, the most since Sept. 7, 2011.

A burst of cold, possibly accompanied by snow, is expected next week for parts of the Midwest, where most ethanol is produced, and the East Coast, the largest consuming region for the biofuel, AccuWeather Inc. said on its website. Low temperatures should persist at least into the first of April.

“There’s a stack of rail cars that can’t get to the plants,” Mark Ruyack, a manager at Starfuels Inc. in Jupiter, Florida, said. “The weather, the snow, that doesn’t help.”

Ethanol inventories on the U.S. East Coast fell to 4.5 million barrels last week, down 29 percent from a year earlier, Energy Information Administration data snow. That’s the lowest in records back to June 2010.

Gasoline for April delivery advanced 2.67 cents, or 0.9 percent, to $2.8955 a gallon on the New York Mercantile Exchange. The futures cover reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol futures’ discount to gasoline narrowed to 9.45 cents a gallon from 16.28 cents yesterday and 87.48 cents at the end of last year.

“Low inventories and logistical issues have kept destination pricing for ethanol elevated,” David Dunn, a Naples, Florida-based commodities analyst at brokerage firm Progressive Fuels Limited, said in a note to clients.

In cash trading, ethanol was up 10 cents to $4.10 a gallon in New York, 12.5 cents to $3.15 a gallon in Chicago, 7.5 cents to $3.875 on the Gulf Coast and 11.5 cents to $3.915 on the West Coast, data compiled by Bloomberg show.

The New York spot price was at a premium of $1.46 a gallon to RBOB in New York Harbor as of 2:14 p.m. The biofuel has been trading at a premium since Feb. 25.

To contact the reporter on this story: Lucia Kassai in Houston atlkassai@bloomberg.net

To contact the editors responsible for this story: Dan Stets atdstets@bloomberg.net Charlotte Porter, Richard Stubbe

 

 

 

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What's the difference between crude oil tankers and ethanol or soybean oil for that matter? The whole railroad should be about shut down if any of that weather problem is true.

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