I can't reply to private messages. I only have the basic membership Sorry.
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Keep in mind that's the gross production margin. It doesn't take plant operating costs into account, nor does it factor in taxes, interest costs, etc. The 30% for co-products prices in wet distillers grains as well as corn oil. The corn oil takes into account current corn oil production, but not the increased capacity being installed.
If you go back and read through the 10-Q's for the year, you can see how they fared against that formula. They provide the average CBOT corn and LA ethanol prices along side the actual cost they paid for corn and sale price for ethanol. They also report the percentage actually achieved for co-products.
(edit) They provide it in most of their conference presentations. You can find it here in the footnote on slide 17. Here is that footnote:
*Calculated by using industry standard conversion yield. Using
PEI ethanol sales price, corn basis and co-product return as disclosed in Form 10-Q for each quarter assumes a standard 2.74
in corn yield, consistent across all periods and all plants. Actual conversion yields may differ. For July and Aug’14 margin,
used OPIS LA, CBOT Corn, market corn basis, and Q2’14 co product return.
I don't have access to the OPIS LA price but I do have the equivalent California pricing reported by Progressive Fuels. I use the midpoint between the bid and ask price. Friday's price would be $2.725 for ethanol, and $3.8175 for corn. The accepted basis for corn delivered to California is $1.28. The product return is 30% of the net cost of corn.
So
PEI Ethanol – (CBOT Corn+basis) *(1-Co product return)/2.74
$2.725 - ($3.8175 + $1.28)*(1-0.30))/2.74 =
$2.725 - $5.0975*0.70/2.74 =
$2.725 - $1.30 = $1.425
FYI the low was $0.502 on October 2nd. It's been climbing ever since.
The short side is clearly looking for any pause in support and then dumping everything they can (including air shares) to knock the price back. I've seen enough of this type of blatant manipulation to get not get cocky about it, but reality in no way matches the current share price. Margins have more than doubled since the beginning of Q4 and are back to where they were before the slide started in mid-August, but the share price in no way reflects that. Clearly there's a combination of naked shorting playing off weak hands.
Corn and Soybeans Slip on Signs of Increased U.S. Farmer Selling
I figured this was just a matter of time . . .
Delays harvesting corn in the U.S. Midwest remain minor this week
Not sure why you would use $2.02 for ethanol, as the price in California is now considerably higher than that. You can find the California market price for dry distillers grains on the USDA website (Mid-west prices don't tell you what it's going for in California).
Keep in mind that PEIX doesn't dry their distillers grains.
I suspect the reason why no one mentioned it is that it pretty much describes the development of Tullow's Jubilee and TEN assets in Ghana. Tullow has no assets to develop in Guinea. That first requires a find.
The negative pressure might be in large part due to what's driving ethanol prices. Check out this article about Andersons ethanol operations. The current situation is impacting Midwest and Eastern ethanol producers in a lot different way. They can't get rail cars to ship ethanol. The market as a whole doesn't recognize that a producer like PEIX doesn't ship their ethanol by rail. It's all delivered by truck to the local market.
Rail threat
However, the group warned too that the US rail hiccups could hit its grain and ethanol businesses, which are bigger earners, and its fertilizer sales operations too.
"It should be noted that poor railroad service could impact the company in the fourth quarter," Mr Anderson told investors.
"Both grain and ethanol groups rely on outbound rail service to turn their inventory, which enables them to effectively serve the customers.
"Further, the plant nutrient group relies on inbound rail to ensure nutrients are available to meet customer needs."
US rail, ethanol fears send Andersons plunging
I've come across a couple other articles like this one about Midwest/Eastern producers, where they are running out of storage capacity and facing having shut down because they can't get their ethanol to the market.
The crush margin for PEIX was eroding in September. It first started declining in mid-August. It bottomed on October 2nd.
I'm going to start calling this bad news, since the market doesn't respond to positive ethanol developments. Cal ethanol tops $2.50/gallon, PEIX production margin gains another 6.8 cents to $1.196
I think the increase in institutional ownership can only be seen as a strong vote of confidence. The end date of the reporting period coincides almost perfectly with the bottom of the slide in ethanol margins (September 30th vs October 2nd). If they were going to bail, they would of done so by the end of the quarter.
I wonder how many selling at present are even aware that West Coast margins are back up to the levels prior to the slide. For that matter I wonder how many are aware that the environment all this quarter is conducive to Kinergy booking profits on buying and selling.
5A Stocks of Total Motor Gasoline and Fuel Ethanol by PAD District with Total Gasoline by Sub-PADD
The excel file is available right at 11 am. The PDF version doesn't come out until later. In the excel file, select the data tab, then scroll all the way down and all the way over to the right.
West Coast stocks increased by 100k barrels from 2,275k to 2,376k
Probably a response to the significant price increase. Blenders are probably trying to rely on their stocks on hand in hopes the rail situation magically goes away. The continued price pressure increase would seem to indicate that's not going to happen any time soon.
As for corn, the price of corn has been steadily increasing, but on the West Coast, the price of ethanol has consistently outstripped the gains in corn price. It's fairly easy to understand overall.
2.74 gallons of ethanol produced from a bushel of corn.
30% of the price of the corn recovered in by-products.
An 8 cent increase in corn = $0.0292 material increase per gallon ethanol at a basic level
Factor in the co-product return: 0.08 x .3 = 0.024/bushel = 0.0088 return/gallon produced.
So 0.0292 - 0.0088 = $0.0204. In other words, a 2 cent increase in the price of ethanol offsets a 8 cent increase in the price of corn.
West Coast ethanol increased by 10 cents yesterday alone.
Unbelievable. The spread between ethanol and corn has improved dramatically in the past two weeks in general and even more so for the West Coast, and the market treats it as if it got worse.
The reported losses in commodity contracts accounts for $2.626 M. That works out to 11 cents/share of anticipated earnings right there. The good news is ethanol has been steadily climbing since October 3rd.
Also production for the quarter as actually 46.8M gallons, as opposed to an expected 50M. That adds up to a healthy chunk of change. I suspect it took longer to get Madera up to full capacity than we anticipated
I don't have time to go through the entire filing until tomorrow evening, but perhaps the answers are all there, waiting to be dug out.
Yes, the amount of warrants remaining and any possible impact they might have are almost insignificant, compared to what happened the last 9 months.
Da train boss, it's da train!
West Coast spot ethanol prices rallied in early trade ahead of weekly supply data, with trade sources saying ongoing railroad woes are keeping drawn down inventories from being replenished in a timely fashion.
"It is winter and everybody's trying to load the trains, so the rail service is getting congested," said a trade source. "The industry thinks (plant) run rates are getting higher, but the rail service is not getting better for the next five months."
Prompt California ethanol traded at $2.38 per gallon, up 6.0 cents, while Arizona prompt ethanol traded at $2.40 and $2.42 per gallon for a 9.0-cents gain.
Source: DTN
Maybe Christmas came early :D
I'm really looking forward to the inventory update numbers for the west coast tomorrow :D
Sadly I'm busy for most of the trading day but I will have time to take a look around 1 PM eastern time.
California ethanol keeps surging
Bid $2.41 Ask 2.43 up from yesterday's $2.30/$2.33
[urlhttp://www.progressivefuelslimited.com/Web_Data/pfldaily.pdf][/url][tag]Progressive Fuels Daily Report[/tag]
That pushes he PEIX daily production margin to $1.129
Highest it's been since September 8th
So, is the new signature of HFT manipulation now 49 51 49 51 49 51 as opposed to 100 100 100?
More evidence of supply issues from the PFL daily report:
"Railcars for this week shipment out of Nebraska on BN rail line traded at $2.05 late in the day."
The prices reported by the USDA on Friday for Nebraska plant sales was $1.83. CBOT has only gained 2 cents over Friday's price. Nebraska is the closest Midwest ethanol producing state. California terminal price is surging, rack prices for the western states are surging, prices for what would most likely be shipments destined for western states are surging . . .
You get the feeling that West Coast inventories will be down a bit in this week's EIA report?
California ethanol surged again, bid/ask now up to $2.30/$2.33
PFL Daily report
The PEIX margin also pushed higher, to $1.033
Glad my post generated some discussion
The silence was feeling way too ominous :D
Well it looks to me like the decision has been made despite the fact that PEIX margins rose substantially in the past week. Is it because lemmings believe in fortune telling more than the price of corn & ethanol?
Meanwhile, the total world corn numbers are virtually unchanged (ok, actually down 0.04%) at 990.32 Million metric tonnes (MMT). The US harvest estimate drop of 1.72 MMT is all but offset by the total increase in other countries of 1.34 MMT
see page 12
Probably more to do with everyone selling because a major value investor is buying big time and now holds 7% of the outstanding shares.
There is no rationale to the market sometimes.
Market seems anxious about the USDA numbers due out later today
Monthly Crop Production due out @ 12:00 PM
Monthly Grain World Markets and Trade Report due at 12:15 PM
Weekly Crop Progress due out @ 4:00 PM
Here are the expectations from Bloomberg:
U.S. farmers may harvest 14.556 billion bushels of corn and 3.969 billion bushels of soybeans this year, the most ever and topping previous U.S. Department of Agriculture forecasts for 14.475 billion and 3.927 billion bushels, a Bloomberg survey showed. The USDA is set to release new estimates later today. World inventories of both crops also will be larger than the earlier forecast, the survey showed.
source
I think the recent run-up on corn prices may be about to come to an end
Hard to know what's going on. What is it you're seeing that you have to scroll down so far to get past?
Well from what I've read, the cost to build a generic 50M gal/year capacity ethanol plant in 2007 was around $2.25/gallon.
PEIX has 4 plants, (2-40 & 2-60M) so the valuation on replacement cost for the plants would be somewhere in the range of 200M x $2.25 = $450M. That's without the additional upgrades (corn oil extraction, etc.)
Note that Vertex One says they like to locate companies with undervalued assets on their books. Now take a look at the value of PEIX's plants on their books. Property and equipment are valued at $155,771,000 (keeping in mind they don't own 4% of the plants would only add another 6.23M to that valuation).
When I put that together with the development with Vertex One, I can't help but feel a level of excitement about what next week might bring.
A little more insight on Vertex One: Have a look at their Vertex Arbitrage Fund strategy. Doesn't it pose the question of whether they know something we don't? The game is afoot, Watson. The game is afoot!
Vertex One Investment Philosophy:
We seek to achieve superior long term performance through investments by identifying catalysts that will create value for shareholders. We seek companies that have low price-to-value metrics, have put themselves up for sale, or where a misvaluation has occurred within the capital structure of the company.
We buy stocks that are trading at values below two-thirds the price-to-value metrics of their competitors. Firms with low debt, annuity stream-like revenues and high dividends are also favoured.
link
Intersting. Vertex One Asset Management, Inc. appears to be aggressively expanding their ownership.
Q1 2014 they held 470,000 shares
Q2 2014 they held 1,000,180 shares
As of today's filing, they now hold 1,680,680 shares.
From the PFL daily report:
Physical ethanol remained strong after very strong gains the prior
couple of days. November Argo was last seen $1.96 @ $1.99 Next week Argo traded $2.10 while prompt traded as high as $2.18. This week Chicago Rule 11 transacted at $2.24 in the market while some prompt FOB IN was heard to be bid as high as $2.25 for seller’s cars.
So what's driving this? Has the RFS decision leaked out to big oil, prompting a buying surge while they can get ethanol at these prices? Did a fleet of tankers just set sail, after siphoning enough ethanol off from national inventory to drop the levels by 10%?
Overall, the PEIX production margin weekly average was $0.873, up from $0.763 last week. If the prices from the last couple days hold, we'll be above, or at least very close to a buck next week.
Corn. It's not just the US with a bumper crop
EU likely to harvest bumper corn crop
Ethanol now up $0.052, corn down $0.044 and yet people are tripping over themselves to sell out to shorts. Unbelievable.
Can't see corn hanging in either. This was an excellent week for harvest weather. Farmers who have been holding off on selling their crops will start to run out of space to store it.
Ethanol up $0.02 early, corn down $0.042
Could we see the PEIX production margin hit $1.10 today?
This also has to be very good for Kinergy. Ethanol they would of bought a week ago in Nebraska for $1.73 was at an ask of $2.30 yesterday in California.
Another big jump in Cal ethanol price, bid ask now $2.27/$2.30
Yesterday was $2.11/2.14
Tuesday was $2.02/2.04
PEIX production margin now @ $1.01
I wouldn't be surprised to see another 5-10 cent increase in the Cal terminal price today/tomorrow.
The PEIX production margin as of yesterday was $0.852. The upwards trend should mean healthy buy/sell margins for Kinergy as well.
Substantial jump in the California ethanol price today, from a bid/ask of $2.02/$2.04 yesterday to $2.11/$2.14 today. That's based on the daily numbers put out by Progressive Fuels. The last time the California price was at this level was on September 15th.
The PEIX production margin responded accordingly, and now sits @ $0.852/gal. This is the highest it's been since September 15th, when it was $0.952. Corn was considerably lower then at $3.43, compared to today's $3.70
Somehow, I don't think corn is going to stay this high much longer. The harvest is now in high gear. A number of articles have stated that farmers have been holding back on selling, but as their on-farm storage fills, they're going to have no choice but to sell. With a record harvest out there (with numbers that just keep getting bigger), sooner or later there's going to be a flood of corn on the market.