The profitability of an average 100 million gal/year (378 million lit/year) ethanol plant based in the Midwestern US region surged in April to the highest since November 2011 due to falling input costs, a study from Iowa State University showed.
Ethanol production margins based on a plant built in 2007 and able to convert an average of one bushel of corn into 2.8 gallons of the biofuel climbed to $0.21/gal from $0.07/gal in March, according to the model designed by the ISU.
The study shows a sharp recovery in ethanol producers' margins after sustained losses in 2012, when an ethanol supply glut was met by dwindling gasoline consumption and record-high corn costs.
Margins in April were mostly boosted by a sharp drop in corn prices to $6.74/bushel from $7.44/bushel in the previous month. Meanwhile, ethanol prices slid to $2.48/gal from $2.52/gal.
Revenues generated from sales of DDG, or distillers dried grains, a byproduct of ethanol used in animal feeds, declined to $240/mt from $263/mt, according to the ISU.
Improved margins led persuaded producers to raise output in April, according to the data from the Energy Information Administration. The US regulator said ethanol production rose to around 840,000 b/d (12.9 billion gal/year) in April from around 820,000 b/d in the second half of 2012, and is likely to remain at this level through mid-2013.
The surge in output was partially led by strong demand for so-called RINs, or Renewable Identification Numbers, which are credits used by refiners to prove compliance with the federal biofuels mandate.
Refiners can obtain RINs by blending more ethanol into gasoline or by purchasing the credits in a secondary market.
Boosted margins also prompted producers to restart previously idled facilities. POET LLC, the second-largest ethanol maker in the US, resumed production at its Macon, Missouri, facility at the end of April after shutting the plant for two months because of high corn costs.
In March, Valero Energy Corp., the third-largest producer in the US, restarted all three of its plants idled in mid-2012.
Spain's Abengoa, which operates several corn-based facilities in the US, also said it had switched on all its facilities due to improved margins.
