"Ethanol plants nationwide are facing a pincer move as the price of the corn used to make ethanol has shot up at the same time the price of ethanol has tumbled, following the lead of crude oil prices. That has let some of the air out of the gold-rush mentality that pervaded corn-producing states last year, and it has injected an element of risk to the industry unknown just a few months ago.
“Anybody could have made money last year. You didn’t even have to be a good manager,” said Troy Prescott, a Randolph County, Ind., farmer and president of Cardinal Ethanol. “But the numbers are not as attractive as they were this summer.”
If profits keep falling at ethanol producers nationwide, however, analysts say there are bound to be delays or cancellations of the opening of at least some ethanol plants – particularly those that have yet to start construction.
“Some of the plants that aren’t as far along will stop,” Prescott said."
Say Poppa Zit…I noticed you changed the “location” of your combination temperature/time gauge on your posts from Eola to Cicero…hope all of us at Eola didn’t tick you off somehow!
Interesting, the last line of the newspaper article mentioned IBE’s Bluffton plant. I can see it and it is just a couple of piles of soil right now. I haven’t seen any construction activity since December. (of course it is slightly more difficult to move dirt when it is under 15" of snow[;)]) This plant has plans for its own 4-track loop on the property with each track capable of holding a 100 car unit train. This loop would be served by a passing siding that doesn’t exist, but the railroad (NS) has talked about putting one there for years. Another, smaller, plant 3 miles down the line has already been cancelled.
Ethanol plants in Iowa are becoming nearly as common as cornfields. This could end up like Holland’s infamous tullip bubble.
The whole industry is a ward of the government. State tax breaks in Iowa make the cost less than straight unleaded. The EPA blending requirements have really made the whole industry take off. Supply and demand is working its magic on the price of corn.
Some are betting the coming acres in corn will cause a shortage of soy beans. Bad weather in South America could drive bean prices higher than since Nixon’s Soviet grain deals in the early '70s had $14.00 per bushel beans.
The product works. It keeps me from dumping fuel injector cleaner in my pickup’s gas tank. -10 is no cause for gas line freeze up as ethanol blends with water. What it does to older engines will you have reaching for your torque wrench in a hurry. Neoprene, sealed cork carburator floats and other components not for designed for it melt. Small, air cooled engines especially should be checked for potential problems.
Diversion of grain to liquid fuel may be a net loss for rail. All those hoppers of corn that moved to the coast for export may end up moving as fewer tank cars of alcohol. It brings to mind the economic root cause of the Whiskey rebellion in Western Pennsylvania during President Washington’s administration.
“Good intentions” mandated by government always play hell with markets. In the end, Adam Smith wins.
Tank cars loaded with flammable ethanol produce much higher revenue per car than grain hoppers loaded with corn. Some of the ethanol plants also receive grain in covered hoppers.
For those folks who are not familiar with the Whiskey Rebellion:
The WR was the result of the imposition in 1791 of a federal excise tax on distilled spirits, which was primarily whiskey, an important cash crop for small farmers on the western frontier of PA as well as other trans-Appalachian areas. The distilled whiskey was in fact more valuable than the grain itself. That is probably the case with Ethanol today.
Also, these farmers in western PA were to a large degree mostly Ulster Scots and Germans, who were politically as well as geographically isolated from the state government in Philadelphia and the central government in Washington. The excise officers who attempted to collect the tax were frequently greeted with threats and occasional violence. As a consequence, in 1794 President Washington organized and commanded an army of militia to supress the rebellion in the western counties of PA. The tax was repealed by Congress in 1803.
Washington, in his message to Congress in 1794, reminded Americans that they should “persevere in their affectionate vigilance over that precious depository of American happiness, the Constitution of the United States. Let them cherish it, too, for the sake of those who, from every clime, are daily seeking a dwelling in our land.”
I simply reverted to the town where I grew up when the “Eola” tag ceased updating the temperature a few weeks ago, that’s all. I switched it back, so we’ll see how it goes … for now.
Brave folks were those early advocates of grain distilling to stand up to an oppressive, costal centered government. They are an inspiration to continue the struggle against any increase in the conentration of power.
Ethanol from corn is not that much of a winner. The price of corn is driven up and the power consumed in making it from corn is high. Other crops hold more promise than corn. One much of the interests have talked about is using all of the sugar industry, including beets, since that will drive the price up enough that the Federal government won’t have any reason to susidize it anymore (which will also save the American candy industry since they won’t have to pay more than the international price for sugar). Of course, in the long run renewable sources not currently playing a prominent role in the food chain such as the various grasses and so on are the answer barring a break through in hydrogen technology. Whatever organic technology emerges, the railroads will get their share. But if I was them I’d make sure any of the smaller plants somehow provide the money for any rail connections since they are the most likely to go under in the inevitable shake-out that happens in any new, hot industry.
The corn based ethanol industry has always had as it’s underlying goal, to increase the usage, demand, and therefore market price of corn. The farmers. farm co-ops, and farm states have a very specific interst in the future useage of ethanol. The environmental/cutting oil useage end of it is simply a marketing tool to the rest of the population. The ethanol industry has done a good job pushing their product. Who could fault them for a job well done?
I have been concerned about the energy gain from ethanol. The studies that have been done have results from minus gain to 67% gain. So IMO those studies are not reliable or maybe not truthful. Each one seems to support their own point of view. I have not found a study that accounts for the decreased gas milage of my car in their findings.
Describing the Federalist government in 1791-1794 as oppressive is nonsensical.
With the ratification of the U.S. Constitution in 1788, a strong central government was necessary for this young and restless nation. George Washington, Alexander Hamiltion and, later, John Marshall, understood this.
Brazil uses alcohol to move cars since 1970´s and now we are developing ethanol use for to substitute diesel to power trucks and trains also. Our project use oil from plants like “mamona” ( castor bean). U.S are interested in our project and made a partner with us to develop a better ethanol from corn in its land. We must thing about the end of petroleum era, and this is the time to think on solutions. Also, if U.S get success with the ethanol project, our countries will depend less from Iran and Venezuela petroleum.[;)]
A couple of companies have dusted off an older process for cellulose based ethanol. I think that will be the longer term best source of ethanol. This process is based more on the stubble than the grain using enzymes to break the cellulose down into a fermentable starch. This could be the best of both worlds for the railroads, they haul the grain and the ethanol.
The caloric value of corn is more efficiently extracted when it is used to feed cattle and humans than when it is converted into alcohol. That’s the joker in the deck that doesn’t always get mentioned. Swapping an energy crisis for a food-and-export crisis is not a step toward a healthy economy, IMO.
IIRC, corn is one of the most difficult starches for the human digestive system to break down, particularly the outer casing of the corn kernel. Juvenile digestive systems process it not at all, while adult digestive systems only partially digest it.
However, corn can be made into flour, which is digestible.
After corn is made into ethanol, it becomes a high energy food for humans and animals. Of course, the ethanol takes some of the food value away, but makes the grain much more digestable. Same goes with other alcohol grains such as barley, oats, wheat and also “waste products” of the sugar industry. So, with a lot of these crops, you can get a “two-for” out of them.
While today’s prices are not attractive, from conversations with plants locally, they are still doing good. We will see some further reduction in profits at the plants due to the supply catching up with current prices. Managing those plants require razor sharp practices. Anything can make a difference. This is where the larger plants have the economy of scale. Locally, most all the plants have expanded to 100 mmg/y seeing the advantage.
The good news is for those plants that use Natural Gas, the contract prices have come down, adding to the bottom line. Also DDGs prices have gone up because of corn prices and supply tightening for quality product (gold). Again this adds to the bottom line, and helps make up the shortfall of ethanol prices.
Investment has indeed slowed, but this is due to the fears of market saturation and corn supply. I think in Iowa, we are getting close to limit, and investment has followed that logic.
Most active projects locally are already on-line with railroads. And don’t think for a moment that a company like UP has not gone full bore talking with potetial operators about locating on UP lines. Funny how those former CNW branch lines now look pretty good. CN, IC&E/DM&E are also agressive in marketing their lines to ethanol plants.
I forsee most new projects to continue in the areas east of Illinois, including New York, and Ohio. However proposed projects in fringe areas, or places where importation of corn would be needed, may fall by the way.