By the way, just so you guys know I believe (with the ethanol subsidy/mandates considered) breakeven for ethanol producers at $120 crude on ethanol for corn is $9-10 or so. $140, something like $11-12. (according to the research I've read) Also note this market was at $6.25 a few months back before this news. The sky may be the limit here. That speaks nothing of a supply constrained market. Look at page 2 http://www.ces.purdue.edu/extmedia/ID/ID-339.pdf
this rally is totally supply concern driven (since march or so) and looking at the carry between july dec it is beyond 100 percent showing there is ample corn n ow look at 09 with july/dec. july is what a buck over dec? The picture is not as urgent right now as everyone thinks (imo of course) The commercials are not hoarding corn in 08 but 09 they have pushed july a buck over dec. Next year will be a big year, it is very interesting to watch nonetheless. good trading all
Demand destruction is quite real.. Verasun cratering ethanol production. we'll see if 750 means anything for front month..
Here's the story: VeraSun, one of the nation's major operators of ethanol plants, has delayed the opening of two plants, saying market conditions are to blame. VeraSun, based in Brookings, S.D., operates 11 ethanol plants in eight Midwestern states and was planning to open five more before the end of the year. That included plants in Welcome, Minn., and Hartley, Iowa, where production has been put on hold. VeraSun spokesman Michael Lockrem said Friday that the company will continue construction on its three remaining start-up plants and will monitor market conditions on a daily basis. "We remain confident that the industry will turn around, and when conditions become more favorable, we will begin production," he said. Colwich-based ICM was the designer on the delayed plants. ICM president David Vander Griend said he expects more plant start-ups to be put on hold. "The best plant to shut down is one you haven't started yet," he said. "With ethanol priced $1 a gallon below gasoline on the rack and corn futures hitting $7.50 today, the numbers just aren't there." The VeraSun pullback comes as the nation's ethanol industry heads to two major expositions this week: the National BioScience Expo in San Diego and the International Ethanol Fuel Workshop in Nashville, Tenn.
thanks I found it as well. What explains the discount (besides energy content) that ethanol trades at vs gasoline?
In general. I trade mainly kc and chi never traded Minni. I feel mildly bullish, commercials will hoard IMO. I hand chart alot of different wheat spreads and the march 09 july 09 chi spread has tightened up a decent amount. It feels strong. but we shall see.