The estimated weekly production margin for a typical US Midwestern dry-mill ethanol plant Friday dropped 8.58 cents, or 20.6%, to a five-week low of 33.04 cents/gal as the average delivered feedstock corn cost rose while the ethanol price fell.
Specifically, the estimated weekly ethanol production margin had not been this low since the week ended July 6, when it was at 28.54 cents/gal.
The estimated margin was calculated using data from Platts and government agencies, including average delivered corn cost, dried distiller grain prices, natural gas prices, certain blending costs and ethanol prices.
Estimated fixed costs were based on a 50 million gallon/year capacity Midwestern plant with 32 employees at an average salary of $47,300/year.
The average estimated delivered feedstock corn cost soared 24.38 cents/bushel to an all-time high of $8.2293/bushel. The previous record high was $8.0493/bushel for the week ended July 20.
The higher feedstock corn cost was due to lower corn yield and inventory projections for August of the 2012/13 marketing year in the US Department of Agriculture's monthly World Agricultural Supply and Demand Estimate report released Friday, sources said.
The USDA reduced the yield forecast by 15.5% to 123.4 bushels/acre, the lowest since the 1995/96 marketing year, when it was at 113.5 bushels/acre. Ending corn inventories were also forecast at the lowest level since the 1995/96 marketing year as the August monthly projection was 45% lower at 650 million bushels.
The average dried distiller grains byproduct credit was on a two-month incline as it rose $4.13/st to a record $306.36/st. Though the increase was not enough to push up the estimated weekly ethanol production margin, dried distillers grain prices had been surpassing record highs since the week ended June 29. Reduced ethanol production, in the form of lower operating rates and ethanol plant shutdowns, limited the amount of dried distillers grains in the market, sources said, thus driving prices up.
The estimated denaturant cost jumped 6.25 cents from the previous week to $1.9825/gal FOB pipeline, while the estimated natural gas cost was stable at $3.12/MMBtu. The denaturant cost was based on Friday's Platts assessment of Conway natural gasoline, which is the Kansas hub, while the natural gas cost was based on the August Platts Chicago ANR 7 pipeline monthly index.
The estimated ethanol price used in calculating the margin was the Platts Chicago Argo ethanol assessment Friday of $2.5875/gal, down 0.8 cents from a week ago as a drop in feedstock corn futures Friday led to the slight decline.
September corn futures on the Chicago Board of Trade settled down 18.25 cents/bushel Friday to $8/bushel as the USDA's projection for ending inventories for August of the 2012/13 marketing year was no lower than the industry had expected, analysts said.
