The profitability of turning corn crops into ethanol in Europe surged to seven-month highs this week following a jump in the spot price of the biofuel, according to data compiled by Platts.
The corn-to-ethanol crush margin, an indication of gains or losses from turning the starch in corn crops into biofuel, surged to Eur55.45/cubic meter ($73/cu m) Tuesday, the highest since September 19, before falling to Eur51.45/cu m Wednesday.
The crush margin is calculated by measuring the Platts FOB Rotterdam fuel ethanol spot price against front-month Euronext grains futures.
The European ethanol spot price surged to a close of Eur640/cu m Tuesday, the highest since April 9, while June-delivery corn futures settled at Eur216.50/mt.
Some 2.7 mt of starch grains are necessary to produce one cubic meter of ethanol, according to sources.
Also on Tuesday, the feed wheat-to-ethanol crush margin climbed to Eur22.67/cu m, the highest since March 13. Meanwhile, the milling wheat-to-ethanol crush margin fell further into negative territory to minus Eur41.08/cu m, the lowest since April 17.
Ethanol inventories in Europe have been cut in recent months by a combination of plant shutdowns in the Netherlands and in the UK as well the imposition of anti-dumping duties on US ethanol cargoes in February, which slammed the import arbitrage window shut.
Ethanol producers' net profit margins also depend on cash generated from sales of distillers dried grains, a high-protein animal feed product that can make up to 30-40% of an ethanol distillery's operational income.
One producer said that DDGs loading in May are currently priced at Eur285/mt, or Eur256.50/cu m, FOB Rotterdam.
Spain's Abengoa, one of Europe's largest ethanol producers with six ethanol plants in the continent, said this week that operating margins in its biofuels segment rose to 2% in the first quarter from 0.2% a year earlier due to "improved margins." The Seville-based producer also said it expects production to return to "normal levels" as the market conditions rebound, without giving further details.
