Analyst: Worst is Behind Ethanol

Molchanov: China, Other Countries Will Need US Ethanol

Ethanol margins continue to be depressed at the start of 2019, as evidenced by the losses DTN's hypothetical ethanol plant continues to experience.

The ethanol industry as a whole is looking and waiting for any kind of good market news.

Pavel Molchanov, senior vice president and equity research analyst for Raymond James and Associates, said during the National Ethanol Conference in Orlando on Tuesday that not only is the worst behind the industry, but there is reason for optimism.

"The good news is that, all over the world, there is more and more implementation of renewable fuel standards," he said. "Let's not lose sight of the fact that there are well over 30 jurisdictions that have a fuel standard. They're not going to be able to get there without ethanol from you. There's not enough ethanol that could possibly be produced in China."

In addition, Molchanov said there are new emerging export markets in Mexico and Ukraine, coming off a record 1.6-billion-gallon export year by the ethanol industry in the United States.

The latest look at DTN's hypothetical 50-million-gallon plant based in South Dakota shows the negative margins have moved little since our last update in January. The plant currently is showing a 31.9-cent loss, down from January's 29.7 cents. This number includes continued debt service.

Most ethanol plants are not paying debt, however. If the hypothetical plant were not paying debt, it would have recorded a 1-cent-per-gallon loss -- a drop from a 2-cent-per-gallon profit in January.

Last month, a $160-per-ton price for dried distillers grains bolstered margins. In our latest update, the price dropped to $141.

The ethanol rack price for this update came in at $1.385 per gallon, up from $1.36 last month. The price of corn paid by the hypothetical plant remained steady at $3.78 -- the Chicago Board of Trade price.

GROWTH SUFFERS FROM CHINA