Ethanol Producers Feel The Impact of Higher Corn Prices

Includes: AVR, USBE, VSUNQ
by: Konrad Imielinski

CBOT corn futures spiked Tuesday as September corn rallied 9.5 cents to $3.35 per bushel. The reasoning: Spillover support from higher soybean values and forecasts for hot and dry weather in parts of the sourthern Midwest. Some southern sections of the Midwest are expected to remain dry over the next 10 days which have lead analyst to speculate that corn conditions will not improve next week.

More importantly, investors are highly anticipating the crop production report due out on Friday. The average production estimate for the 2007-08 crop year is 12.909 billion (23 analysts), 69 million bushels above the 12.840 billion estimated by the USDA in July. The average yield estimate is 151.2 bushels per acre (23 analysts), approximately 1 bushel above the USDA's estimate.

In an article published Tuesday, CNN's Jeff Cox states "many analysts are expecting corn prices to surge over the next several months as farmers give back this year's unprecedented corn plantings of about 90 million acres to wheat and soybeans."

Wheat and Soybean prices currently look very attractive to farmers right now.

However, as long as crop production is above analyst expectations, corn prices will remain steady. Anything lower, though, is likely to result in a runup.

Ethanol producers are feeling the impact:

VeraSun (VSE):
Aurora plant: $3.15 per bushel
Fort Dodge Plant: $3.05 per bushel
Charles City Plant: $2.95 per bushel

US BioEnergy (USBE):
Platte Valley Plant: $3.26 per bushel
Woodbury Plant: $3.30 per bushel
Ord Plant: $3.30 per bushel

Aventine (AVR)
Pekin Plant: $3.16 per bushel

Hawkeye Renewables:
Iowa Falls Plant: $2.88 per bushel