Market and product
European ethanol spot price hits four-year low
Spot barges sold in Rotterdam fell Eur3.50 to an assessment atEur436.50/cubic meters ($590.57/cu m) FOB, the lowest level since April 30,2010, when prices hit Eur426/cu m FOB, according to Platts data.
Wednesday's drop followed a larger Eur10 plummet on Tuesday, which wasthe biggest single-day fall in the European ethanol spot price since April 4,when it tumbled Eur12.50.
Spot prices have remained suppressed throughout most of 2014 as domesticproduction outpaces demand, according to market sources. Aside from 10 days inMarch when ethanol prices ranged from Eur522-Eur529/cu m primarily on the backof export demand from the Middle East, the fuel-additive has not sustainedlevels above the Eur500/cu m mark for the majority of the year.
Alongside the low prices, producers have experienced negative estimatedcrush margins for both corn and wheat ethanol production for most of 2014.This means ethanol spot prices have been trending below the cost producersincur to purchase feedstocks, when both are compared on an ethanol-equivalentbasis.
In Europe, most ethanol plants also generate revenue from sellingprotein-rich animal feed made with the leftovers of crushed grains, an incomestream that can sometimes offset negative margins on ethanol sales, accordingto industry sources.
Despite a bumper grains harvest predicted for late summer and fallingcrop prices, one ethanol producer said that margins were still "red andgetting redder."
Dampened ethanol prices over the year have not, however, resulted in areduction in production rates, with earnings results from European producerspointing to increased production alongside falling year-on-year profitability.
Germany's CropEnergies said on July 8 that although yearly production hadjumped 30% in the March-May period, net profits dropped 94% year on year. Thesame was true for Austria's food and starch processor Agrana, which announcedJuly 10 that revenues and earnings contributions from its ethanol businessfell in the March-May quarter despite increased contributions from its wheatstarch business arm. Both CropEnergies and Agrana are part of Germany's sugargroup Suedzucker.
Full-year 2014 fuel ethanol production in Europe is expected to increaseto 5.45 billion liters, up 2% from 2013, according to estimates fromLausanne-based Platts' unit Kingsman, while consumption is forecast to slide1% to 5.83 billion liters.
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