Midwest floods hammer U.S. ethanol industry
by Jarrett Renshaw, Reuters
via GFM Network News/Glacier FarmMedia Feed/via Canadian Cattlemen - April 8, 2019
New York | Reuters — The March floods that punished the U.S. Midwest have roiled the ethanol industry, hammering prices and trapping barrels in the country’s interior while the U.S. coasts suffer from shortages of the biofuel.
The historic March floods have dealt a series of blows to large swaths of an ethanol industry that was already struggling with high inventories and sluggish domestic demand growth. And the ethanol shortages are one factor pushing gasoline prices in Los Angeles and southern California to the highest in the nation and they could top $4 a gallon for the first time since 2014, according to tracking firm GasBuddy (all figures US$).
Benchmark price for ethanol used in most supply contracts initially jumped on news of the floods but has been hobbled by rising waters around the Chicago hub that have halted barges and sales. That stands in contrast to prices on the coasts, which rose dramatically — drawing in heavy imports from Brazil, the main U.S. ethanol competitor.
The floods inflicted billions of dollars in damage to crops and homes in the U.S. Midwest, and knocked out roughly 13 per cent of ethanol capacity.
U.S. ethanol is made from corn and required by the government to be blended into the nation’s fuel supply to reduce emissions.
While some ethanol plants were flooded, the primary effect of the rising waters was to shut rail lines that serve as the main arteries for corn and ethanol deliveries.
Ethanol prices on the coasts spiked due to shortages, but Midwest producers have been unable to take advantage because of washed-out rail lines, market sources told Reuters.
“Unfortunately for anyone who was impacted by logistics issues it was a double whammy. You couldn’t capture the rally,” said one trader...