By Michael Hirtzer
CHICAGO, Dec 2 (Reuters) – U.S. ethanol production is likely
to continue at a record rate despite its rare premium to
gasoline as cheap corn, high biofuel prices and even cool
weather provide ideal conditions and strong profit margins.
“There’s no sign that says we should slow production. The
mentality is that everyone is running,” said Todd Becker, chief
executive of Green Plains Inc, the fourth-largest U.S.
ethanol producer behind Archer Daniels Midland Co, POET
LLC and Valero Energy Corp.
“The industry runs much better in the cold than the heat
because we don’t have to cool the plants down. This is the
plants’ sweet spot,” Becker said.
The U.S. Energy Information Administration last week said
ethanol production averaged 982,000 barrels per day in the week
ending Nov. 21, the largest volume in the dataset that started
in 2010. The agency will release new weekly figures on
Wednesday.
Production surged 6 percent from the same period last year
as multimonth highs in ethanol futures resulted in the
best profits for biofuel makers since summer.
Export demand for ethanol is booming, up more than 40
percent so far this year, helping to make ethanol more expensive
than gasoline in some domestic markets. Meanwhile, costs to make
ethanol have declined in the wake of a record-large U.S. harvest
of corn, of which about a third is used for ethanol.
“We’re running at capacity and our plants are filled to
capacity with corn,” said Jim Seurer, chief executive of Glacial
Lakes Energy LLC, which has two South Dakota ethanol plants that
each can produce as much as 100 million gallons annually.
The ethanol trade group the Renewable Fuels Association pegs
annual stated production capacity – or “nameplate” capacity – at
about 14.9 billion gallons, or 354 million barrels. But many
ethanol plants can produce above that and production could reach
a peak of 1 million barrels per week, said Scott Irwin, an
agricultural economist at the University of Illinois at
Urbana-Champaign.
However, ethanol futures are trading at a 30-cent
premium to gasoline futures, the second-largest in the
last five years. If that disparity persists, ethanol demand from
fuel blenders could decline. Ethanol is less fuel efficient than
gasoline but is cleaner-burning and higher-octane.
“These price relationships that we see right now are
obviously unsustainable. Either ethanol has to come down or
gasoline has to go up,” Irwin said.
(Reporting by Michael Hirtzer; editing by Andrew Hay)