The US ethanol production margin reached nearly a 14-month high of 36.84 cents/gal Wednesday as CBOT corn futures continued their downward spiral.
S&P Global Platts assessed Chicago Argo ethanol, a benchmark for physical product in the US, at $1.5675/gal Wednesday, down 2.05 cents. The CBOT July corn futures contract settled at $3.3575/bushel, 8.25 cents lower.
The last time the margin was so high was on May 18, 2015, when it reached 38.07 cents/gal.
A simple production margin can be calculated by dividing the cost of corn per bushel by 2.8, the number of gallons of ethanol that a bushel of corn can produce. The resulting number is the cost of corn per gallon of ethanol.
"It has a huge effect," said one source. "Plants will want to run as hard as they can while there are good margins."
Corn has plunged 23.3% from a peak of $4.3775/bu on June 17 as weather forecasts shifted from hot, dry weather that would damage the corn plant to mild temperatures and rain.
Corn market participants have abandoned long positions in favor of short ones in response to higher forecast yields.
"If you have a plant you are running hard, and those that are are making bank," the source said.
The Energy Information Administration is due to release its weekly data showing ethanol production Thursday morning.
