Iowa State researcher David Peters has created a tool to determine the cost and profitability of producing corn ethanol.
David Peters, an assistant professor of sociology in Iowa State's College of Agriculture and Life Sciences, has been getting questions about the profitability of ethanol plants under current market conditions and decided to create a spreadsheet that would allow anyone to figure it out for themselves.
"I've developed a model that inputs all the costs," he said. "Then it indexes it to corn prices and ethanol prices to determine profitability."
With the aid of this tool Dr. Peters estimated the near term costs of producing ethanol for plants with and without debt. Below is the summary of his report.
For ethanol plants with capital debt costs the ethanol break even price
ranges from $1.85 to $2.05 per gallon. This is higher than the near-term
ethanol price of $1.72 to $1.75 per gallon. Thus, ethanol plants with capital costs
are expected to generate net losses in the near-term.
• At $3.75 corn the ethanol break even price with debt is $1.85 per gallon.
• At $4.00 corn the ethanol break even price with debt is $1.90 per gallon.
• At $4.25 corn the ethanol break even price with debt is $2.00 per gallon.
• At $4.50 corn the ethanol break even price with debt is $2.05 per gallon.
For debt-free ethanol plants with no capital costs the ethanol break even price
ranges from $1.70 to $1.90 per gallon. Under near-term ethanol prices, debtfree
plants are expected generate small net profits when corn prices range between
$3.75 and $4.00 per bushel. However, debt-free plants begin to generate larger net
losses as corn rises above $4.25 per bushel.
• At $3.75 corn the ethanol break even price is $1.70 per gallon.
• At $4.00 corn the ethanol break even price is $1.80 per gallon.
• At $4.25 corn the ethanol break even price is $1.85 per gallon.
• At $4.50 corn the ethanol break even price is $1.90 per gallon.
The news release from Iowa State says that the tool can be found at http://www.soc.iastate.edu/ but I wasn't able to find it. If anyone else can please leave a comment with the location.
Source : Iowa State News Release
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