Ethanol prices rise to $1.59/lb
Reduced production, rising sanitizer demand drive ethanol prices up
By Tom Stundza -- Purchasing, 5/18/2009 9:55:00 AM
Ethanol prices have increased 14¢ this month to an average $1.59/lb, a seven-month high, because of higher energy costs, increased corn prices, reduced production and stronger use by makers of sanitizers and other cleaning products.
Crude oil futures prices have been trading at 2009 highs in response to growing expectations of an economic recovery while a new government report showing a drop in projected corn stocks this year sent corn futures up by about 20¢/bushel.
The Department of Agriculture (USDA) expects corn stocks in 2009-2010 to total 1.15 billion bushels, a 28% reduction from an estimated 1.6 billion bushels in the 2008-2009 crop year. U.S. corn use for 2009-2010 was also projected 3.4% higher in the USDA report, which sees a 7% increase in food, seed and industrial corn use. An increase of 350 million bushels of projected corn consumption by the ethanol industry accounts for most of the industrial usage increase.
According to Purchasingdata.com, ethanol prices jumped up to their highest levels since November in the May survey.
A report by ICISpricing.com says the H1NI (swine) flu outbreak has triggered a sharp increase in industrial ethanol demand due to strong consumption of sanitizers and other cleaning products. Ethanol can account for as much as 70% of the contents in hand sanitizers.
Looking ahead, the strong demand from the sanitizer market, coupled with higher feedstock corn prices, could lead to ethanol price increases in the second half, according to producers--especially in the face of reduced chemical ethanol production that is starting to eliminate earlier oversupply.
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