The estimated weekly production margin for a typical US Midwestern dry-mill ethanol plant fell 2.24 cents, or 6.7%, on the week to 31.04 cents/gal Friday as the drop in ethanol prices was greater than that of the average cost of delivered corn feedstock.
The estimated weekly ethanol production margin has not been this low since the week that 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 Midwestern plant with 32 employees, each paid an average annual salary of $47,300.
The average estimated delivered feedstock corn cost declined for the third straight week, falling 8.65 cents/bushel, or 1.1%, to a two-month low of $8.1164/bushel, largely on a better-than-expected yield projection from the US Department of Agriculture.
USDA's monthly World Agricultural Supply and Demand Estimate report on Wednesday showed projected yields for September at 122.8 bushels/harvested acre.
The average estimated dried distiller grains byproduct credit also fell for the third week, dropping $7.76/st to a nine-week low of $289.12/st.
Fixed costs were stable as the estimated denaturant cost was unchanged form the previous week at $2.1050/gal FOB pipeline, while the estimated natural gas cost also was steady at $2.80/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 September 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 $2.4225/gal, down 10.65 cents, or 4.2%, from a week ago as weaker gasoline demand and higher imports from Brazil kept markets well-supplied, sources said.
Midwest ethanol inventories grew 228,000 barrels to an eight-week high of 6.635 million barrels in the reporting week ended September 7, according to weekly data released by the Energy Information Administration Wednesday, as the four-week rolling average of gasoline demand sank 154,000 b/d to a month-low of 9.004 million b/d after reaching a 2012-high of 9.158 million b/d the previous week.
The US ethanol market has to potential to remain long on supply in the near future, market participants said, as ethanol plants that were previously sidelined in June due to poor margins may soon be resuming production. If gasoline demand remains weak and the ethanol market remains well-supplied, margins could move down even more, they said.
