Renewable Energy Report

March 2018 Monthly Renewable Energy Report

Brought to you by the Iowa Grain Quality Initiative and Decision Innovation Solutions.

 

Iowa Ethanol Gross Production Margins: Update February 2018

In this month’s report, we look at the ethanol crush spread. Ethanol crush spread is a dollar value calculated as the difference between the combined sales values of ethanol, distillers dried grains with solubles (DDGS) and corn distillers oil (CDO) and the cost of corn in producing ethanol. This also is commonly known as the gross production margin (GPM). Previous updates covering GPM can be found in the September 2017 Report and March 2017 Report. This GPM analysis represents a real plant situation, and demonstrates the importance of the ethanol co-product market on the ethanol plant profitability.

Ethanol producers often use this spread to hedge the purchase price of corn and sales prices of ethanol and DDGS. The spread relationship between corn, ethanol, and DDGS varies over time and offers many opportunities for speculative actions. This GPM calculation is not intended to show precise ethanol plant margins.

Table 1: Weekly Average Iowa Ethanol and Co-Products Processing Values and Indicators of Average Gross Production Margin; February 2015 – February 2018.

 

Production and Revenue Trends in Corn Ethanol, DDGS, and Corn Distillers Oil

Supported by the 2007 Energy Act, ethanol production has increased. Production surged from 8.37 billion gallons in the 2007/08 September to August marketing year to 13.81 billion in 2010/11, reaching a record volume of 15.70 billion in 2016/17 (Figure 1). Data for the first four months of the 2017/18 marketing year indicates ethanol production climbed 2.8 percent to 5.37 billion gallons compared with the same period in the previous marketing year (5.23 billion gallons) (see Figure 1). 

Figure 1. U.S. Ethanol Production

 

 

 

The Feature of the Month - March 2018

An economic study done by Iowa State University’s Center for Agricultural and Rural Development analyzes the potential impacts of a cap on prices of ethanol RINs (renewable identification number) and allowing E15 sales throughout the year. 

Prices and Profitability Models

The spreadsheets listed below provide data and trends for various components of the renewable energy industry. These files are updated with new information each month. Energy prices and their grain feedstock prices are commodity prices that are vulnerable to large swings over time.