Shut Down the Ethanol Plants NOW!

WINNIPEG, Manitoba/CHICAGO, July 5 (Reuters) - U.S. corn
surged 5 percent o n T hursday to its highest price in over a year
and soybeans jumped to within sight of their record high as new
forecasts offered no sign of rain relief for withering crops.
With fields now at the mercy of what may be the worst
Midwest drought in nearly a quarter century, grain traders
ignored the potentially bearish influence of a rising U.S.
dollar and focused on growing signs that one of the biggest corn
crops ever planted by U.S. farmers is now shrinking by the day.
Corn prices have surged by nearly 30 percent over the past
two weeks, dragging wheat and soybean prices up with them and
threatening to kick off another bout of food-inflation fears.
Only a few times before have prices risen so far, so fast - once
was in 1988, the last time the U.S. heartland faced such a dire
drought.
New forecasts showed that a spell of blistering triple-digit
heat should ease by the weekend but showed no signs of rain in
the near term for key states like Iowa and Illinois. Weather
models released at midday turned hotter and drier for next week,
igniting a further buying spree.

We hve an ethanol plant near Columbia Pa and its been a boodoggle since day 1

Every time I see "This fuel may contain up to 10% Ethanol" on pumps I cringe. Congress can shut Ethanol production down anytime they want by ending subsidies for it

The USDA now projects a corn harvest of 12.97 billion bushels,

The ethanol industry is now forecast to consume 4.9 billion bushels of corn

Potential Impacts of Poor Corn Crop on Ethanol Market

By: Robert Rapier

I have long felt that one of the biggest threats to the U.S. ethanol industry is a major drought/crop failure in the heart of corn country. This year we may be experiencing such an event. Recent reports indicate that what had been expected to be a record crop of corn has been downgraded such that only 40% of the corn crop is being classified as in good or excellent condition. This is down 48% versus last week and 69% versus a year ago.

Corn prices are naturally surging in response; current corn prices are 21% higher than they were a year ago. Because so much of the corn crop is devoted to meeting ethanol mandates, there is a potential supply conflict being set up between food producers and ethanol producers.

This was always the risk in my mind; that a major drought could reduce the corn crop and result in surging fuel and food prices at the same time. This creates a situation that politicians who are not friendly to the ethanol industry will likely exploit. It won’t likely lead to an end to the mandates, but support for a 15% ethanol mandate (E15) — something the industry desperately wants — will likely erode in the face of the weak corn crop.

As you might expect, ethanol prices are moving higher, but I don’t think the price fully reflects the situation with the corn crop. It has been clear for at least two weeks that ethanol prices should move up in response, but the response has been slow and is just now gaining momentum. Normally, one would expect demand to fall in response to higher prices, and for that to mitigate the price rise, but gasoline blenders do not have the option of reducing their ethanol usage because of the mandate in place.

Thus, it appears that there is a short term opportunity in the ethanol market brought about by the corn shortfall. Longer term, there is a distinct risk for the growth of the industry as E85 prices become less competitive, and gasoline prices potentially rise because blenders are being forced to blend higher-priced ethanol. The MPG adjusted fuel price for E85 has now risen to above $4.00 a gallon, which is 50 cents higher than the price of midgrade gasoline.

The bottom line is that the short-term market for ethanol futures is bullish, but the longer-term market may become extremely bearish if politicians are successful in using the current situation to soften future support for ethanol.

During a press call held July 11 Agriculture Secretary Tom Vilsack addressed a question about whether the USDA would support waiving the RFS in light of the drought. That was the day that the monthly World Agriculture Supply and Demand Estimates report was released, estimating this year’s corn crop at 12.97 billion bushels, a 12 percent decrease from the earlier estimate of 14.79 billion bushels. “We're not at that point, and certainly, the renewable fuel program is an extraordinarily important aspect of our efforts to rebuild and revitalize the rural economy,” he said. “The reality is we are still looking at the third largest corn crop on record, and we are still looking at a very large bean crop, notwithstanding the disaster. Obviously, it could have been significantly higher because of the additional planted acres. So, at this point, we have no plan to adjust the Renewable Fuel Standard.”

The U.S. harvest may drop to 11.8 billion bushels (299.7 million metric tons), said Dan Cekander, director of grain research, who correctly predicted in March that soybeans would trade at the most expensive level relative to corn since 2010. Cekander’s output forecast is 29.75 million tons less than the latest estimate from the U.S. Department of Agriculture, and would be the smallest crop since 2006-2007. Futures traded as high as $7.89 yesterday, near the $7.9925 record set in 2008

The USDA cut its forecast for this year’s U.S. corn harvest by 12 percent to 12.97 billion bushels on July 11, down from a June estimate of 14.79 billion bushels. The agency reduced its soybean projection by 4.8 percent to 3.05 billion bushels. Morgan Stanley predicted yesterday corn output at 11.89 billion bushels and soybean production at 2.99 billion bushels.