Have fuel prices been giving you whiplash? ACE Ethanol and Fox River Valley Ethanol President Neal Kemmet says this has been a unique year for gas prices — the numbers are susceptible to headlines, and there are more factors at play besides supply and demand.
He reminds listeners that when gas prices go up, driving demand falls. This hurts renewable fuels because a majority of ethanol is blended into U.S. gasoline. On the other hand, ethanol is cheaper than gasoline, so when gas prices go up, blenders look for that discount.
Just like corn growers, ethanol producers are facing high input costs this year, Kemmet explains. Not only are plants paying more for corn, but the price of chemicals, enzymes, parts, natural gas and transportation has also risen.
Roughly 60 percent of ACE and Fox River Valley ethanol is domestic. The rest is exported to Canada. He says hiccups in transportation — rail strikes, low river levels and trucker shortages — are impacting ethanol and its byproducts. He quotes that 95 percent of ethanol is moved by rail.
The low river levels in key waterways, such as the Mississippi River, are impeding movement of key products, including Dried Distillers Grains.
“We’re starting to see a huge backup of product in the Midwest,” Kemmet says. He explains that DDGs prices usually rebound in the fall (because cattle are no longer on pasture). The price is not rebounding this year because the ability to export DDGs are limited due to the low river levels.
In other news, Kemmet says this year’s corn crop is looking good.
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