- Sample from April 10, 2007, Newsletter -

- "Rack prices were relatively flat again last week,  with the United States national ethanol rack price average moving fractionally up, increasing 0.51 cpg on the way up from 234.48 to 234.99 cpg.  The national average for rack prices have been relatively flat for the previous three weeks. The average for the day last Friday was actually fractionally higher than the weekly average, coming in at 235.41 cpg.   The Ethanol Market National Reference Rack in Des Moines, Iowa, also increased fractionally last week, increasing 0.25 cpg on the way up from 222.42 to 222.67 cpg.  The rack average last Friday in Des Moines was also fractionally higher, coming in at 223.05 cpg.

            Out of 80 reporting racks, 17 reported no change and 23 racks reported decreases of between fractionally lower, to just over 12.0 cpg lower in Waupun, Wisconsin.  41 racks reported increases of between fractionally higher, to an increase of 13.22 cpg in Cheyenne, Wyoming.

            The Chicago Board of Trade (CBOT) fuel ethanol April contract held ground throughout the week, before increasing 2.6 cpg yesterday, on the way up to 212.6 cpg.  At 212.6 cpg, the Monday CBOT ethanol futures spread to NYMEX RBOB (209.46 cpg) is 3.14 cpg.  Actually, Mondays NYMEX RBOB of 209.46 is down  3.42 cpg, below last Thursdays (Friday Holiday) close of 212.88.   The Chicago fuel ethanol spot market moved down a few cents, with trades by the end of the week in the high 210’s to low 220’s cpg range.  However, the market firmed quite nicely yesterday, to the 219 cpg range, and moved up again today, in pre-lunch activity, to the 225 cpg range.   The math is fairly simple, and there definitely is favorable blending economics, not only in Chicago, but across the Country.  The CBOT ethanol forward month swap OTC settlements actually firmed a bit, closing between 192 and 194 cpg for 2008 and 2009 yesterday.   New York Harbor spot ethanol prices backed off 5 to 10 cpg last week, with recent trades in the upper 220’s to lower 230’s cpg range.  However, with activity around 228 cpg yesterday, the market was buzzing with activity this morning, up to the 235 to 240 cpg range..  As with Chicago, blending economics currently favor ethanol.  With spot New York Harbor gasoline in the 210 cpg range, ethanol at 237 cpg, minus the 51 cpg tax credit, this brings the ethanol cost down to 186 cpg.   As reviewed last week, the Gulf Coast supply situation has fully corrected, and so have prices, with spot numbers falling off more than 10 cpg, with trades down in the upper 220’s to the low 230’s range by the end of the week.  The West Coast fell off proportionately as well, dropping around 10 cpg, down to the low to mid 230’s range.          
            As discussed last week, all of this downward ethanol price activity is directly in the face of very firm gasoline, and exploding crude oil.  Although, crude dropped with the end of the Iran hostage crisis.  However, gasoline prices remain hot, with the near month contract trading over 215 cpg last Thursday, before backing down to 209.46 yesterday.  However, futures prices for the next five months, the summer driving season, are all trading over 200 cpg as of yesterday.

            Last month, Brazilian ethanol prices increased significantly (see chart page 6).  The CEPEA/ESALQ Index for anhydrous ethanol (Sao Paulo state) increased 25.7% percent, and hydrous ethanol firmed 17.8%.  Just last week, the anhydrous index increased 10.3%, averaging 198.8 cpg (US dollars, excluding taxes, interior mill).  At this level, on a profit comparison, ethanol is more favorable than sugar. The strong Brazilian ethanol industry resulted in a sugarcane acreage increase of 7% last year.  Acreage increased from 15.2 million acres to 16.26 million acres in 2006.

            The United States industrial ethanol market increase of 20 cpg effective April 1, 2007, remains quite firm.  Where permissible by contract, the full 20 cpg is passing through.  Tight inventories remain in this market As reported last week, the USDA Corn Prospective Plantings report of 90.5 million acres is up 15% compared to 2006 and up 11% compared to 2005.  This would be the highest acreage since 1944, when 95.5 million acres were planted for all purposes.  Strong demand fueled by the burgeoning ethanol industry, and the corresponding high market prices are encouraging farmers to plant more corn acres, taking away from soybeans in the Corn Belt and cotton in the Delta and Southeast.  The USDA Prospective Plantings report just came out last week, but farmers have been planning and preparing for the increased acreage since last November.  Well, you need seed corn for the plantings, and the popular varieties were sold out well before Thanksgiving 2006.   The popular varieties are the biotech hybrids that are resistant to specific herbicides, corn borer and root worm, as well as drought tolerance.

             Many of the additional acres in 2007 are coming from the Cotton Belt, and other regions where biotech hybrids would be desired.  And it not just the new regions that will have trouble finding the desired seed types and sizes, but expanded acres in the Corn Belt are finding preferred hybrids in short supply.  As a result, there will be lower yields with these new acres, and higher pesticide costs, as well as higher fertilizer cost for the corn on corn fields, and the corn on cotton fields, as well as acreage that is not top prime farmland.

            Meanwhile, the recent cold snap has had some influence on the corn market.  The northeast Louisiana corn crop apparently has survived recent unseasonably cold weather.  Freeze warning were in place for the previous three days.  Corn has already emerged in Louisiana.  Initial reports indicate that there was some freeze burns in the field, but nothing significant.  Louisiana farmers have favored corn over cotton, and have planted 700,000 acres of corn this year, the most since 1978.          

Elsewhere, very cold and wet weather in the Corn Belt has farmers just a little concerned with spring planting plans. Some areas in the Corn Belt received over 2 inches of rain last week, and freezing temperatures.  The combination of wet and cool weather has delayed drying in the fields.  Soil moisture in much of the Corn Belt is as high as it has been in the last 10 years.  Also, optimum soil temperature for planting is 50f, and a definitive weather pattern change is needed to increase temperatures to this level.  Also,  with high moisture levels in the field, there is a chance to damage  soil due to soil compaction, that can decrease yields due to poor rooting.

            The Chicago Board of Trade (CBOT) saw record futures volume last month (see charts page 10), with the fuel ethanol contract trading at a record volume of 37 contracts per day during March 2007.   FCStone, as a Market Maker for the contract, insures a minimum level of liquidity throughout the trading day in the front month contracts. This in turn has attracted additional participants and orders resulting in an increasingly dynamic market.  The Ethanol futures order book can be viewed on most front end trading systems and quote vendor screens under the electronic ticker symbol ZE.  Also, participants in the ethanol industry have embraced cleared OTC’s, the ethanol forward month calendar swaps, which have become an extremely popular tool for the industry.  Average daily volume for March 2007 was 98, and on March 30, 2007, over 1,200 forward month swaps were booked on a single day. 

            The CBOT , along with FCStone, have announced  free seminars in six Midwestern cities, starting in Omaha, Nebraska, on April 17, 2007.  The free seminars are open to all, and will cover the ethanol futures and OTC products.  Go to the Industry Events page on www.ethanolmarket.com for other locations and dates.

            Ethanol Market will publish three new exciting web sites this month.  The new sites will be e85market.com, biofuelsmarket.com, and a third site that will be dedicated to the global biofuels market.  We have purchased several URL’s for the third site and are in the process of making the final selection for the name.  All of the sites will be fully owned by Ethanol Market, and advertising customers will enjoy the benefit of not one, but four exciting biofuels industry web sites.  The sites will all have branding similar to ethanolmarket.com."

- Sample From February 20, 2007 Newsletter -

Renewable Fuels Association(RFA) President Bob Dinneen addressed over 2000 attendees at the RFA National Ethanol Conference annual meeting at the Marriott Starr Pass in Tucson, Arizona. In his State of the Industry Address, Bob addressed an enthusiastic crowd. Several key excerpts are listed below

            “My friends, from this podium one year ago, I stood before you and proudly proclaimed, ethanol has arrived. I may never have been more right. 2006  was a seminal year in the ethanol industry’s history, notable as much for the growth in public awareness as for the phenomenal growth in production. In April, for the first time ever, a president of the United States addressed a gathering of the Renewable Fuels Association and noted “renewable energy is one of the great stories of recent years, and it is going to be a bigger story in years to come.”

            In May, the RFA was invited to open the trading day at NASDAQ, reflecting the growing recognition on Wall Street that ethanol and biodiesel represent growth markets for the future. By June, ethanol had successfully replaced MTBE in virtually every gallon of reformulated gasoline where it was still being used. In October, for the first time, a president and 3 cabinet secretaries gathered on the same stage to promote a vision for renewable fuels few could have imagined even a year ago. At that same event, the president of the American Petroleum Institute reflected upon the oil industry's newfound appreciation for ethanol’s octane and gasoline blending quality, and noted refiners could now see a day when ethanol was blended in every gallon of gasoline sold in the country.  In November, the 3 major U.S.automakers met with the president of the United States and pledged to increase their FFV production to 50% of their vehicle sales by 2012.

            Before the end of the year, ethanol blended gasoline accounted for 46% of the nation’s motor fuel, with sales literally from coast to coast and border to border. Throughout 2006, 15 new ethanol biorefineries opened, construction began on no fewer than 50 new biorefineries, and the industry set new all­time records for ethanol production, sales and capacity.

            The U.S.ethanol industry produced an astounding 4.9 billion gallons, sold more than 5.5 billion gallons, and with new biorefineries opened and expansions completed, closed the year with more than 5.4  billion gallons of capacity. But we’re not done yet. As I stand here today, there are 78 plants under construction–steel in the ground, dirt being moved welders welding. These plants will add another 6 billion gallons of capacity within 18 months – 3 billion gallons this year! As the industry grows, it is expanding beyond the traditional grain belt, with plants currently under construction in Washington, Texas, New York and right here in Arizona.

            And as the industry has grown, so too has the industry’s footprint on the economy. In 2006, the ethanol industry: Increased gross output by $41 billion; Supported the creation of 163,000 jobs, including 20,000 in the manufacturing sector; Put an additional $6.7 billion into the pockets of American consumers; and, Added $2.7 billion in new tax revenue for the federal government and $2.2 billion for state and local treasuries.

            From such numbers, it is clear the nation’s investment in domestic renewable energy is paying off. Indeed, as 2007 dawns upon us, the U.S. ethanol industry can now envision a whole new horizon, one filled with promise, but also daunting in its scope. The president’s 20 in 10 proposal, unveiled during this year’s State of the Union Speech, suggests as much as 35 billion gallons of alternative fuel will be needed to displace 20% of our nation’s petroleum consumption by 2017. The Governors’ Ethanol Coalition is promoting an initiative requiring 60 billion gallons of ethanol by 2030. Senator Dick Lugar has introduced legislation mandating 100 billion gallons of ethanol by 2030. And countless other initiatives have been discussed or introduced, each built upon the premise that this nation’s energy, economic and national security demands significantly greater production of domestic renewable fuels.”

            The full text of the speech is available on the Press Release page on www.ethanolmarket.com

- Sample From February 20, 2007 Newsletter -

Crude oil futures firmed last Friday, climbing almost 2.5%, moving up $1.40 on the way up to $59.39 per barrel.  The market rallied after Nigeria warned about the possibility of more militant attacks on oil facilities, and indication that OPEC members are maintaining the previously agreed to production cut quotas.

            Following crude, RBOB moved up as well, closing up 4.81 cpg last Friday, on the way up to 164.53 cpg.  The following six NYMEX RBOB contracts closed at 173, 176, 177, 179, 179 and 167 cpg.  The firming energy complex will provide underlying support for ethanol, helping to support ethanol blend values in the marketplace. United States crude oil refinery inputs averaged over 14.8 million bpd last week, which was down 1,000 bpd compared to the previous week.  Refineries operated at 86.6% of their operable capacity last week, which is typical for this time of the year.  Gasoline production fell off a bit, averaging just over 8.9 million bpd.

             Total gasoline imports averaged 820,000 bpd last week. Total motor gasoline inventories declined by 2.0 million barrels last week, but still are in the  upper end of the average range for this time of the year.  During the previous four weeks, gasoline demand has averaged nearly 9.1 million bpd, which is about 3.6% above the same period last year.

            Natural gas in storage was 2,088 Bcf last week, which represents a net decline of 259 Bcf compared to the previous week. Stocks were 193 Bcf less than last year at this time and 268 Bcf above the five year average of 1,820 Bcf.  With the nation in a cold snap, the implied net withdrawal during the week was 259 Bcf, which is the second largest weekly net withdrawal, just below the 250 Bcf record set in  January 1997.  The implied net withdrawal is 74% more than the five year average withdrawal of 149 Bcf for this week in the year, and almost three times as much as last year’s withdrawal of 92 Bcf.  Regionally, the  East Region recorded a record high implied net withdrawal of 179 Bcf.  Natural gas closed up $0.21 last Friday, up to $7.503 per MMBtu, and the next six successive contracts all closed up to $7.533, $7.598, $7.670, $7.775, $7.856, and $7.913 per MMBtu.    It should be noted that natural gas futures prices for next winter closed last Friday in the low to mid $9.00 range

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