Profit margins for US corn-based ethanol producers sank to their 2012 lows in June as selling prices for the biofuel fell, data compiled by Iowa State University showed.
Margins dipped further into negative territory to minus 17 cents/gallon, down 10 cents/gallon from May and reaching the lowest level ever recorded by the university's ethanol profitability model started in January 2005.
Ethanol producers have been operating in the red since the start of 2012 due to a combination of oversupply and increased corn costs.
In June, ethanol selling prices fell to $2/gallon from $2.11/gallon in May, while corn costs softened to $6.26/bushel from $6.28/bushel and DDG prices remained unchanged at $216/mt.
The university's model uses ethanol, corn and DDG prices as reported by the US Department of Agriculture in the state of Iowa. The model also reflects the economics of a 100 million gallons/year ethanol plant built in 2007.
Red margins have led US producers to cut back on utilization rates and caused some shutdowns across the country, data from the Energy Information Administration shows.
Ethanol output plunged to its lowest level in almost two years on the reporting week ending July 06, reaching 821,000 b/d, EIA said.
Valero Energy has already idled plants in Nebraska and Indiana in June, while Nedak Ethanol has also halted output at a facility in Nebraska last month. Both said they would restart operations once market conditions improve.
Margins in July could continue to suffer as existing corn stockpiles tumble and weather concerns over the harvest starting in September put upward pressure on prices.
Front-month September corn futures at the Chicago Board of Trade rose 13% so far in July to a close of $7.40/bushel Friday. At the same time, spot Chicago ethanol prices climbed 12% to an assessment of $2.5425/gallon Friday, according to Platts.
