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So Oil is paying top dollar for the rail cars?

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more rail cars being turned over for hauling a surging amount of crude oil

 

 

WASHINGTON, March 26, 2014 -- The same weather-induced rail congestion that has plagued the transportation of grains and other commodities is also taking a toll on ethanol supplies and driving prices up to nearly three-year highs.Analysts say the inability to move ethanol out of Chicago to other parts of the country, particularly east, has caused producers to lower production and reduce supplies to the point that April prices rose Monday on the Chicago Board of Trade to just more than $3.00 per gallon, a price higher than that for gasoline futures and a level not seen since July 2011.

Harsh winter conditions have slowed trains down and resulted in fewer rail cars per train. That, combined with more rail cars being turned over for hauling a surging amount of crude oil, has left railroads with insufficient capacity to haul ethanol, wheat and other products.
Analysts say ethanol plants that usually see trains return within a matter of weeks now have to wait months. The BNSF Railroad said earlier this month that it was experiencing delays of at least 15 days.
Still, industry officials say the return of warmer weather is expected to improve rail shipping conditions within the next several weeks and that ethanol production will return to levels necessary to ensure adequate supplies.

http://www.agri-pulse.com/Ethanol-prices-soar-as-rail-delays-prompt-producers-to-reduce-supplies-03262014.asp

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Analysts say the inability to move ethanol out of CHICAGO to other parts of the country.......

 

The ethanol is not made in Chicago.   The Chicago Board of Trade is located in that city.    So the statement above is BS but issues with rail car supplies may be true.  Another reason to have flexible feedstocks and plants located elsewhere. 

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I mentioned to Dad the other day about how this whole "weather related track conditions" story is what'sbeing put out and he considers it BS. The rail roads are making more transporting oil, so the oil is getting the preferential treatment over other products. The few times he's been doing inspections this year and from getting caught by trains, he's noticed more and more tank cars placarded for some form of oil.

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Dan,

 

This is a major problem for the ethanol industry. All of our trade organizations are working on this issue and it is a top priority. Many ethanol plants have slowed down because the rail is not performing. The high prices only bring out the critics. The YellowHose sites have not been impacted by the temporary spot ethanol price spike. Carbon Green BioEnergy is committed to growing the FlexFuel supply in our area and at this point we have 9 new locations under development. They are all planned to be on line in 2014. Other ethanol producers need to figure out how to supply, stabilize, and grow this market. It is not rocket science.

 

St.Cloud MN locations have the support of DENCO II in Morris, MN which is why the price spread is stable.

 

Best regards,

 

Mitch Miller

Carbon Green BioEnergy, LLC

Lake Odessa, MI

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I remember back when I was a kid on the farm, before all the "small town farmer's cooperatives" started to consolidate... where each individual town had their own elevator, that was owned separately by just the farmers in that community...  Anyways, our town's coop (of which my great grand father was a founding member, and the FIRST of it's kind in Nebraska) was having difficulty getting rail cars to ship out the harvest from Burlington Northern. 

 

The solution was that the coop purchased (at great cost) their own set of rail cars.  Enough to fill their sidage, the maximum number they could handle at any one time.  They were painted sky blue (must have been cheaper), and had big white lettering on the side that said "Farmers COOP, Benedict Nebr." on the side.  When they were NOT using them, they would be leased out to BN.  When they needed them, they simply told BN not to lease them on these dates, and to deliver them to their coop. 

 

Technically we rarely ever saw those specific cars, as they would deliver that number of the nearest identical cars... but we had a given right to that many cars on demand, because we purchased the cars, and allowed them to privilege of using them.  I remember the excitement as a kid when traveling of driving through some distant state parallel to the rail tracks and screaming out from the back of the station wagon (it was green so my mom called it the "dragon wagon") "THERE'S ONE OF OUR CARS DAD"... it was the talk of the town for some time...

 

Anyways, back to topic, could not a similar deal be done with ethanol plants?  With all the money they are raking in now, invest some of that into purchasing rail cars? 

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Basically corporate America will do anything to make a buck. Do you notice how they're still talking about high prices in the grocery store and now that corn is cheap, it's the weather. If it's not the weather or corn prices, they'll figure something else out.

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From what I've gathered, Americans aren't friendly in general to rail cars. After all, who wants to sit there and wait upwards of 10-15 minutes when they're in a hurry? We have two major railroads around here, and only the freeways (plus a major pair of one ways) have over/underpasses. After all, why else would CSX be launching a big marketing campaign about their service?

 

I'm not so sure that more rail cars are the solution. With the RVOs still increasing, the solution, in my opinion, is building plants in these high demand areas. Why is it that the largest most densely populated region in the United States have little ethanol production within appreciable distance? Since cellulosic ethanol is still about $2/gallon to produce (number quoted by one of the firms building a cellulosic plant at the national ethanol conference), why not build plants there exclusively for E10 use, and corn ethanol plants for E85? Heck, it seems to me like that would be a fantastic idea nationwide. Let the cellulosic plants supply the ethanol used as a blending agent since that's more profitable and the cost is still relatively high (though halved in the past 10 years), and let corn ethanol go into E85 and mid level blends?

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Analysts say the inability to move ethanol out of CHICAGO to other parts of the country.......

 

The ethanol is not made in Chicago.   The Chicago Board of Trade is located in that city.    So the statement above is BS but issues with rail car supplies may be true.  Another reason to have flexible feedstocks and plants located elsewhere. 

 

Chicago is the rail hub of the nation. Humping yards are where trains are broken apart and rail cars are reassebled with others trains to continue their trip in another direction.

 

Weather and traffic affects rolling stock's ability to escape the Chicago Area rail yards.

Edited by storky

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