|
Trader's Tip
|
Death, taxes and a spring gasoline price rally are all a given in a person's life.
- Jerry Gidel |
|
Quotes & Charts
Quote Search:
Market Specific Links:
Indices/Minis
Grains
Currencies/Forex
Financials
Food/Fiber/Softs
Metals
Energy
Meats
|
Special Message from Our Author
Today's Featured Article
U.S. ethanol output continued to advance on the government update released last week, with record daily and monthly production levels reported for the final month of 2007. According to the U.S. Energy Department, daily U.S. ethanol output rose to 489,000 barrels per day (up 10,000 per day from November), while U.S. overall output pushed to 637 million gallons (up 34 million gallons from the previous month's record output).
If you cannot view the U.S. Daily Ethanol Output by Month chart, go here. |
|
Firming crude oil prices (which neared $100 per barrel) and ethanol's discount to gasoline prices helped keep the U.S. ethanol plant capacity utilization firm. Based on the Renewable Fuel Association's (RFA) operating plant list for the beginning of that month, capacity utilization was 104.2%, down only 0.2% from November's strong level. Even with U.S. ethanol output increasing, this biofuel's stocks slipped for the third month in a row to 10.509 million barrels -- down 685,000 from November. This is a positive sign that ethanol blending is expanding into new areas of the country -- as energy firms try to remain competitive by using ethanol to reduce costs, as crude
oil prices pushed toward triple digits that month.
If you cannot view the U.S. Monthly Ethanol Plant Utilization chart, go here.
If you cannot view the U.S. Monthly Ethanol Stocks chart, go here.
During February, three new bio-refineries came online, totaling 270 million gallons of capacity. However, two plants also suspended operations recently (one in California and one in Kansas, with listed capacity totaling 80 million gallons), citing feedstock costs and operational problems. Overall, U.S. biorefinery capacity is about 8.05 billion gallons when making the adjustments to the RFA's plant list (on its Web site), with this month's startups in Ohio and Iowa. For the fourth month in the last five, the RFA didn't add any plants to its list of new construction.
If you cannot view the New U.S. Ethanol Plant Announcements chart, go here. |
|
|
A Word from a Fast Break Sponsor
Advertise With Us
Complimentary Research Package
For a limited time, American International Capital Management is offering access to research and data for 30 days. Sign up for this offer and gain access to: Daily Futures Research, MBH Weekly Commodity Trading Letter, Daily Trade Recommendations, Weekly Trade Recommendations, Mid Week Market Trend Analysis and more. Sign up today! |
|
|
In the last year's atmosphere of declining processing margins, regional gasoline regulation issues and gasoline distributor inertia about investing in additional facilities, America's ethanol output in 2007 still increased 33% to 6.485 billion gallons vs. 25% during 2006. Current high gasoline prices, the passage of the 2007 Energy Bill (with a higher renewable formula standard of 9 billion gallons for 2008), and some changes in state regulations in the Southeastern U.S. will boost ethanol output this year. However, the high cost of corn and the likelihood of excess plant capacity still overhang this industry. With 2 billion to 2.5 billion gallons in new plants
possibly coming online, margins will remain very tight -- and could result in significant plant shutdowns later this year, if recessionary economic conditions develop.
If you cannot view the U.S. Ethanol Output chart, go here.
Because of these challenges, corn's 2007/'08 ethanol demand could be overstated by 100 million to150 million bushels. But the U.S. Department of Agriculture probably won't make adjustment until the March 31 stocks report, when corn's domestic feed usage will also be monitored. The recent strength in soybeans and wheat prices is also prompting more signs of corn acres declining by more than 5.5 million acres from 2007. This suggests that growing season concerns could open price potential to more than $6 later this year. Hold old-crop sales for now, and keep new-crop coverage at 35%-40%.
The risk of loss in trading commodity futures and options can be substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. |
|
About the Author
Jerry Gidel is the president of Midland Research, Inc. and a research trading analyst for RJO Futures. In April 2003, he joined North America Risk Management Services, Inc. (NARMS) as an associate, specializing in the cash and futures grain markets.
With more than 30 years of experience in commodity analysis and brokerage, Jerry focuses on providing risk management services to livestock producers, grain producers, and commercial operations. He formed Midland Research in 1981 as a consulting firm working from the agricultural trading floor at the Chicago Board of Trade.
He has vast experience as a vice president and senior grain analyst at Dean Witter Reynolds, and as a grain market research analyst with several other leading commodity brokerage firms, including Paine Webber, G.H. Miller, LIT.
He earned an undergraduate degree in Ag business and a graduate degree in Ag economics from Iowa Statue University. He utilizes both fundamental and technical analysis in his market evaluation and brokerage services. Jerry and other professional RJO Futures advisers may be reached at 800-441-1616. |
|
Special Message from Our Author
|
