G2G

Done and Moving On!

Konrad Imielinski — Mon, 25 May 2009 02:06:00 GMT

After three very successful years, I'm putting this blog to rest. Don't worry, though, I'm not leaving for good! I'll be moving my work to a site i'll create once I find some free time from college finals and a summer internship with IAC. The new site, which will be called TrackingX.com, will focus more on the oil market and economic indicators. Thanks for all the support and recognition as it was truly appreciated!

Ethanol: Back from the Dead?

Konrad Imielinski — Tue, 05 May 2009 22:10:00 GMT

Corn-ethanol is still getting some love...

White House Steps Up Support for Biofuels - NY Times

"The White House made its first major statement on ethanol on Tuesday, mustering three Cabinet members to outline a plan to shield corn ethanol producers from the credit crisis, work with them to cut their use of natural gas and coal in ethanol production, and nudge the auto industry toward production of vehicles that can use ethanol at concentrations of up to 85 percent.

In pursuing these goals, the Secretaries of Agriculture and Energy, Tom Vilsack, and Steven Chu, along with the administrator of the Environmental Protection Agency, Lisa Jackson, announced during a press conference the formation of a “Biofuels Interagency Working Group,’’ comprised of the three agencies."

Also from today:

-The Environmental Protection Agency proposed a stricter GHG emissions standard aimed at making corn-ethanol production more efficient. However, this has caused somewhat of an uproar in the corn-ethanol community.

-The Energy Department is pumping $786 million into the biofuel sector, and the Agriculture Department will contribute $1.1 billion within 30 days.

Ethanol stocks rose significantly as a result:
- Pacific Ethanol (PEIX) rose 17 cents (40.48%) to 59 cents. (Today's volume - 4,697,917/Avg volume - 336,734)
- Verenium Corporation (VRNM) rose 15 cents (39.97%) to 53 cents. (Today's volume - 6,350,891/Avg volume - 1,325,990)
- Bluefire Ethanol Fuels (BFRE.ob) rose 26 cents (38.24%) to 94 cents.
- Aventine (ABRNQ.PK) rose 2.8 cents (32.18%) to 11.5 cents.

Let's see how long these stocks will ride the Obama wave...

Tracking the Price of Oil - Feb. 11th to April 9th

Konrad Imielinski — Sat, 11 Apr 2009 06:16:00 GMT

Oil prices have risen $16.30 (45%) to $52.24 a barrel since February 11th:

USO vs. ^DJI

USO vs. EURUSD=X

U.S Crude Oil Inventories

U.S. inventories have gained in 24 of the past 28 weeks. Hmmm....is it just me or is there too much speculation in this current run-up?

For day-by-day details, click here

Deathanol

Konrad Imielinski — Sat, 31 Jan 2009 04:05:00 GMT

Can anyone find a better picture depicting the current state of ethanol?

Ethanol Through Gasoline Pipeline Test a Success

Konrad Imielinski — Thu, 16 Oct 2008 06:46:00 GMT

Last month I mentioned that Kinder Morgan Energy Partners (KMP) plans to run a test batch of ethanol through it's 105-mile long underground gasoline pipeline and, if successful, the pipeline could transport ethanol on a commercial scale by year's end. Well, the test ended up being a success. Kinder Morgan spent 18 months on the ethanol pipeline test as it made more than $10 million in upgrades. The upgrades consisted of replacing, "a number of parts, including seals, gaskets and other components" and cleaning, "the pipeline with a device called a "pig" that ran through the line and scoured the interior with brushes and chemicals." Kinder Morgan still has to make some more modifications, however, it expects to be transporting ethanol for customers by mid-November. If you put things in perspective, spending $10 million is miniscule in comparison to the $1 million per-mile price we would have to pay if we were to construct a separate pipeline strictly for ethanol.

Corn at Year-low as Ethanol's Crush Spread Improves

Konrad Imielinski — Thu, 16 Oct 2008 00:17:29 GMT

Corn prices settled below the $4 mark today for the first time since last October. December corn, the front-month contract, fell 23 1/4 cents to $3.88 per bushel. In the past month, corn prices have fallen $1.74 (31%) due to the rapid decline in both crude oil prices and the stock market. Luckily for U.S. ethanol producers, ethanol prices haven't been hit as badly as ethanol's crush spread has improved:

(what do I mean by ethanol's crush spread?)

Date	Price of Ethanol	Price of Corn	Crush Spread
10/15/08	$1.702	$3.88	$.88
09/15/08	$2.22	$5.62	$.596
08/08/08	$2.04	$4.98	$.732
06/27/08	$2.917	$7.65	$.5176

Brazil's Ethanol Export Model Needs a Face-Lift

Konrad Imielinski — Mon, 29 Sep 2008 06:19:36 GMT

According to this article, it looks like Brazil's transport and export infrastructure is in need of a huge makeover. According to Fabio Abrahao of International Logistics and Supply Chain consultants, Brazil's shipping ports are under heavy pressure. Abrahao states that, "ships were waiting an average of 3.15 days for a berth at the Santos Alamoa ethanol terminal (which is responsible for 80% of Brazil's ethanol exports) in 2007 and that this has risen to 5.37 days this year and will jump to 14.32 days in 2009." The reasoning behind this? Abrahao states that, "trucks are in short supply in Brazil and that some 73% of Brazil's ethanol plants are in the southeast region where they compete with other export products, such as soybeans, steel, and iron ore, for space on railroad export corridors moving to ports." With demand for Brazilian ethanol booming (especially from Japan), this problem needs to be resolved ASAP.

Cosan recently announced its plan to invest $1 billion in a new 386-mile ethanol pipeline which would increase export capacity from 3.5 Bl/y to 14 Bl/y. The pipeline, however, is expected to start operations in the first half of 2011.

The Daily Ethanol - September 17th

Konrad Imielinski — Thu, 18 Sep 2008 01:32:00 GMT

Good News:

-As many of you already know, a major problem with ethanol is that it cannot be transported through existing pipelines because it is highly corrosive and water soluble. It seems, though, that several companies have recently been working to fix this problem. The article states that Houston-based Kinder Morgan Energy Partners (EPL) plans to run a test batch of ethanol this month through it's 105-mile long underground gasoline pipeline. If successful, the pipeline could be transporting ethanol on a commercial scale by year's end.

In addition, The Association of Oil Pipe Lines, which represents about 50 pipeline companies, has been evaluating ways that ethanol can be safely transported in our current pipelines. If a solution is made, we will be able to avoid building a separate pipeline strictly for ethanol which industry experts estimate to be $1 million per mile! In Brazil, Cosan announced it will invest $1 billion in a new 386-mile ethanol pipeline which is scheduled to start operations by the first half of 2011. Brazil currently exports 3.5Bl/y of ethanol. With the pipeline, Brazil is expected to export over 14Bl/y.

-Ethanol futures followed crude oil as October ethanol rose a meager 3.7 cents to $2.177 a gallon

Bad News:

-Wow! Shares of VeraSun plummeted 73% ($3.81) today to an all-time low of $1.41 a share as the company warned of a larger-than-expected loss for the third quarter. In a statement filed after Tuesday's close, VeraSun reported that it expects a net loss in the range of 40 cents ($63 million) to 65 cents ($103 million) a share. Analysts had estimated a net loss of only (in comparison) 2 cents a share.

The reason for the larger-than-expected loss: VeraSun was unsuccessful in hedging against high corn costs - due to what has recently been an extremely volatile market - and as a result expects its corn costs to be in the $6.75 - $7 range (ABSURD!!!). Aventine also had a dreadful day as its shares fell 22.5% ($1.14) to $3.93 on news that, "it could seek to issue new debt and shares or delay construction of some plants in a bid to shore up its cash position." Pacific Ethanol followed the flow as it fell 11.95% ($.19) to $1.40 a share.

-December corn on the CBOT shot up 21.75 cents today to $5.54 a bushel due to broad base buying in the commodity market. Crude oil jumped $6 a barrel while gold futures shot up $82 an ounce as the U.S. dollar fell.

Corn Recovers Big Time

Konrad Imielinski — Fri, 08 Aug 2008 21:08:00 GMT

What a speedy and surprising recovery! Since reaching an all-time high of $7.65 per bushel on June 27th, corn on the CBOT has fallen all the way down to $4.98 per bushel. This is excellent news for ethanol producers as this is the lowest corn has been since January. This is surprising to say the least considering it was only two-months ago that the Midwest region was experiencing its worst floods in nearly 15 years. Concern over the crop has since been alleviated as weather has been near-perfect and the price of oil has dropped considerably. As a result, ethanol stocks have managed to rebound. In the past month, VeraSun has lead pure-play producers with a gain of 58% to $6.72 a share. Pacific Ethanol and Aventine, though, have not been far behind, gaining 53% and 48%, respectively.

Ethanol Producers in Trouble as Corn Sets New Record

Konrad Imielinski — Fri, 06 Jun 2008 05:52:00 GMT

Add "bad weather" to the already lengthy list of problems corn-ethanol needs to overcome. Heavy rains, severe winds, and tornadoes throughout the Midwest has propelled corn into uncharted territory. July corn on the CBOT rose 28.6 cents Thursday to settle at an all time high of $6.43 1/4 a bushel.

Farmers are saying this is the worst weather they have seen since 1993, when U.S. crops suffered from weeks of rain that eventually led to the severe flooding of the Mississippi river. Agriculture Secretary Ed Shafer expressed "a lot of concern" for the corn crop in Thursday's summit on the global food crisis.

The option of replanting corn that was damaged in May is dwindling as farmers are deciding whether they should replace their corn with a shorter growing season crop like soybeans. All ethanol producers can do now is desperately pray for sunshine as there is already a tight supply of corn available.

Assisting Thursday's massive jump was a ~ $6 rise in crude oil as the dollar lost ground against the Euro.

Corn Jumps on Weather/Oil/Yen

Konrad Imielinski — Mon, 02 Jun 2008 23:51:00 GMT

July corn on the CBOT rose 16.4 cents today to settle at $6.15 a bushel.

The Reasoning:

- A "wet May" in the corn belt has taken a substantial toll on the crop. In the first crop progress report of the year, the USDA revealed that only 63 percent of the corn crop is in good to excellent condition, compared with 78 percent a year ago. More farmers than usual are currently deciding whether they should replant the corn that has been damaged or replace it with a shorter growing season crop like soybeans. In Illinois, for example, farmers typically have to replant about 1 to 2 percent of the corn acreage. Emerson Nafziger, extension agronomist at the University of Illinois, though, won't be surprised if this number jumps to 4 to 5 percent for this years crop.

- Oil rose 41 cents to close at $127.26 a barrel as U.S. factory data was stronger than expected.

- The yen had its biggest gain against the dollar in nine weeks as Japan is a major consumer of U.S. corn.

McCain Slams Corn-Ethanol/Obama Follows

Konrad Imielinski — Tue, 06 May 2008 02:10:00 GMT

John McCain and twenty-three other Republican Senators sent a letter last Friday to the EPA asking the agency to reevaluate the current ethanol mandate as food prices continue to soar. The EPA does have the authority to waive the mandate or structure it differently "if the mandate results in adverse unintended effects."

In the letter, McCain stated:

“Every time hardworking American families buy groceries, they feel the financial sting of misguided federal policies mandating that taxpayers support ethanol. It isn’t a surprise that food prices are rising when more than 25 percent of the corn grown today is taken out of the food supply and instead used for subsidized ethanol production. This subsidized program - paid for with taxpayer dollars - has contributed to pain at the cash register, at the dining room table, and a devastating food crisis throughout the world. We need to put an end to flawed government policies that distort the markets, raise food prices artificially, and pit producers against consumers. We must call on the EPA to exercise its authority to not exacerbate this already bad situation.”

Obama, two days later, on "Meet the Press" stated that, "there's no doubt that biofuels may be contributing to [rising food prices]."

With the growing political concern over ethanol, May corn on the CBOT fell 20 cents today to $5.82 per bushel.

In today's trading, VeraSun slipped 9.61% to $6.21 a share while Aventine dropped 7.73% to $5.01 a share.

Without government intervention, ethanol will become a fad real quick.

U.S. Ethanol Investors: Beware of Brazil

Konrad Imielinski — Mon, 14 Apr 2008 18:19:00 GMT

Rumor has it that Brazil's ethanol producers are getting ready to invade the U.S. market. Many will be willing to swallow the 54-cent tariff (which is expected to expire in 2009) imposed on their ethanol. Joao Val, CFO of Sao Martinho SA, one of Brazil's leading ethanol producers, believes "Brazil is going to be much more aggressive this summer to sell ethanol...in the U.S."

With U.S. corn ethanol currently selling at a high price of $2.48 per gallon, many Brazilian companies see a lucrative opportunity in exporting their cheap sugar-cane based alternative. Even with the tariff included, Americans currently get to purchase Brazilian ethanol at a bargain price of around $2.18 a gallon. This number is bound to go even lower with Brazil harvesting a record-breaking sugarcane crop of over 500 million metric tons.

This only spells trouble for the U.S.'s nascent ethanol industry as U.S. producers are already struggling with high corn prices. Currently hovering around $6 a bushel, corn prices are expected to go even higher as the USDA recently announced an 8% expected drop in U.S. corn plantings.

As a result, several ethanol producers have already suspended production or even filed for bankruptcy such as Kansas based Ethanex Energy. New Zealand's LanzaFuels announced late last year its plans to put local ethanol production on hold due to cheaper imports from Brazil. Brazil's cheap prices will only make it harder for these companies to grow.

Brazil will be especially eager to sell to the U.S. with recent developments in the European market. Brazil's hold on this market has become increasingly tenuous as Germany has decided to postpone its plans to introduce a mandatory 10% ethanol mix in gasoline and the UK has decided to do away with the credit line for its E85 program. With more focus put on the U.S. market, Brazil may be successfully maneuvering a checkmate to an already beaten down U.S. ethanol industry.

Corn Hits $6

Konrad Imielinski — Fri, 04 Apr 2008 02:54:00 GMT

Ever since the USDA projected US corn acreage to decrease by 8% this year, corn prices have shot up nearly 35 cents to $6.00 per bushel. Rainy weather moving across the Midwest has also contributed to the current rally as early plantings in the southern belt could be delayed. Ethanol prices, however, have not kept pace as ethanol's crush spread has fallen 33 cents since last Friday to settle at $1.02. Weather will be key for corn in the coming weeks.

The Price VeraSun Pays for Corn

Konrad Imielinski — Mon, 31 Mar 2008 19:29:00 GMT

Let's see how VeraSun faired with its first quarter corn costs:

VeraSun's Daily Corn Bids for 1Q2008

The average price from January 2nd to March 31st for VeraSun's three plants - Aurora (120), Fort Dodge (110), and Charles City (110) - was a horrific $4.84 per bushel. The Linden (110) and Albion (110) plants are not accounted for as their daily corn bids are not available. In its previous quarters, VeraSun has paid an average of $3.61 per bushel (fourth), $3.32 per bushel (third), $3.62 per bushel (second), and $4.05 per bushel (first).

If this isn't bad enough, the USDA stated today that farmers are expected to plant 86 million acres of corn this year, down 8% from 93.6 million in 2007. The cut in supply only means that corn prices will go even higher. May corn on the CBOT jumped 6.6 cents today to $5.67 per bushel.

Just another bad day in the ethanol industry!

Pacific Ethanol Anticipates a Gloomy Fourth Quarter

Konrad Imielinski — Wed, 19 Mar 2008 04:01:00 GMT

Today's biggest stories surrounding the sector:

After its largest one-day gain in nearly four months, Pacific Ethanol disturbed investors by releasing its anticipated fourth quarter earnings.

What did the report say?

-"The Company anticipates reporting gross profit of approximately $1.7 million for the fourth quarter of 2007 as compared to gross profit of $11.7 million for the same period in 2006. The Company anticipates reporting that its gross profit margin was approximately 1.3% for the fourth quarter of 2007 as compared to a gross profit margin of 14.6% for the same period in 2006. The decline in the Company's gross profit and gross profit margins was primarily due to a lower average sales price of ethanol and significantly higher corn costs." Although Pacific Ethanol sold its ethanol for an average of only $1.97 per gallon, it did manage, at least, to out price both VeraSun ($1.87) and Aventine ($1.94). The price PEIX paid for its corn, however, is not mentioned.

-"The Company anticipates reporting a net loss of approximately $14.7 million for the fourth quarter of 2007 as compared to a net loss of $3.1 million for the same period in 2006."

-"The Company anticipates reporting a diluted net loss per common share of approximately $0.39 for the fourth quarter of 2007 as compared to a net loss per common share of $0.11 for the same period in 2006." The average analyst estimate is $-0.13. Yikes!

- Here is one thing to be optimistic about: "The Company anticipates reporting net sales of approximately $130.4 million for the fourth quarter of 2007 as compared to net sales of $80.6 million for the same period in 2006. The volume of ethanol sold by the Company in the fourth quarter of 2007 increased by approximately 82% as compared to the same period in 2006 and by approximately 16% as compared to the third quarter of 2007." It seems that Pacific Ethanol will beat the average analyst estimate of 122 million.

Pacific Ethanol's official fourth quarter earnings will be released on March 31st. Stay away from PEIX and any other pure-play ethanol company until profit margins improve as ethanol's crush spread is still very weak. Can the spring and summer travel season cause ethanol's demand to spike?

Corn Falls Limit-Down

Konrad Imielinski — Tue, 18 Mar 2008 02:20:00 GMT

Today's biggest stories surrounding the sector:

-May corn fell 20 cents today to $5.39 1/4 per bushel due to oil's steep decline. Oil slid $4.53 to $105.88 per barrel as the sale of Bear Stearns added fear to the current credit crisis. Ethanol's crush spread, however, fell also as April ethanol dropped 10.2 cents to $2.36 per gallon.

Ethanol Stocks Continue to Fall Fast

Konrad Imielinski — Fri, 07 Mar 2008 03:57:00 GMT

Today's biggest stories surrounding the sector:

-Ethanol stocks plummeted today due to yesterdays news of corn shooting up 14 cents and Bush finally showing concern over corn-ethanol. VeraSun(9.03%) and Aventine(12.02%) hit new 52-week lows while Pacific Ethanol(10.90%) neared its own of $4.20 a share. Assisting the downfall was a report published today by the Wall Street Transcript which set a bleak outlook for ethanol this year. In the report, Pavel Molchanov of Raymond James & Associates stated "a typical ethanol producer will be at best breaking even this year and possibly losing money on the bottom line" due to what has been a persistent margin squeeze. March corn managed to stay unchanged today.

Ethanol's Crush Spread Plunges/Bush Praises Ethanol Yet Shows Concern

Konrad Imielinski — Thu, 06 Mar 2008 04:13:00 GMT

Today's biggest stories surrounding the sector:

- The combination of March corn climbing 14 cents and March ethanol falling 4.6 cents caused ethanol's crush spread to drop 27 cents today to $1.02. Corn prices shot up as a result of oil's $5 run.

- Investors will be pleased to hear that President Bush renewed his support for ethanol today at the Washington International Renewable Energy Conference. Below is what he had to say:

"The vast majority of [our] ethanol is coming from corn, and that's good. That's good if you're a corn-grower. And it's good if you're worried about national security...Corn ethanol holds a lot of promise, but there's a lot of challenges. If you're a hog-raiser in the United States, you're beginning to worry about the cost of corn to feed your animals. I'm beginning to hear complaints from our cattlemen about the high price of corn. The high price of corn is beginning to affect the price of food...I look forward to the day when people in the parts of our country that have got a lot of forests are able to convert wood chips into fuel...The job of the federal government is to expedite [this] arrival."

Wow! Bush is finally expressing concern over corn-ethanol. That took him a while.

Ethanol Stocks Dive/Cellulosic Ethanol is Behind Schedule

Konrad Imielinski — Wed, 05 Mar 2008 04:38:00 GMT

Today's biggest stories surrounding the sector:

-News of corn reaching an all-time high caused pure-play ethanol stocks to tumble today. VeraSun was the biggest loser as it dropped $1.18(13.21%) to a 52-week low of $7.75 a share. On the CBOT, March corn retreated 12.4 cents to $5.43 per bushel (on profit-taking) while March ethanol dropped only .001 cent to $2.400 per gallon.

-Guy Caruso, the head of the EIA, stated today that "quantities of cellulosic ethanol prior to 2022 will be insufficient" to meet the 36 billion gallon requirement as there has yet to be an efficient way of production. Cellulosic ethanol is responsible for contributing nearly half of the mandate. Caruso estimates that only 32.5 billion gallons will be reached by the target date. Good news, though, is that the USDA and DOE announced today that they will invest up to $18.4 million in several projects aimed at improving the process. It is important that we get such funding as Ethanol will not last if we cannot produce it cellulosically.