I can't reply to private messages. I only have the basic membership Sorry.
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The price for corn at Turlock was quoted as $8.90 for the past week. The USDA also reported that the most recent spot price farmers were receiving at Glenn, CA was $7.85 (delivered). That's approx 2 hours north of Stockton. Works out to $4.21/bushel. That's considerably cheaper than any other price PEIX would be paying for corn right now. If they are accessing sufficient local corn at this point, it would help the margins at Stockton and Madera considerably.
Using that price plus $0.10 for delivery (I don't have an actual delivery cost) and plugging it into the PEIX default formula, based on yesterday's LA ethanol price,the margin would look something like
$1.82 -($4.31 *(1-0.3)/2.74 = approx $0.72/gal. That's about 9 cents better than yesterday's margin using the CBOT nearby futures price.
I wonder how much local corn they can access this time of year.
I was not keeping track of the margins at this time last year. I do know, looking at the historical charts, that ethanol was in this price range last fall.
It's fast approaching half that.
He did address the current situation, stating he felt it's a temporary over-reaction that should correct itself. He didn't get any more specific than that. No one asked him any questions about it that I heard, but mind you I was preoccupied at that point of the presentation.
I believe today's CBOT near futures hit the lower end of the range that ethanol prices saw last year around the same time. I haven't punched in the daily numbers yet, been very busy with other matters of late.
Regarding the tanker car shortage and overall rail problems, this statement was made today by Neil during the presentation
"Our ethanol never gets in a rail car, other than the ethanol we trade and buy from other producers. So it's a very efficient model, where we bring in corn to the plant, the products all go out to the local market, both feed and fuel, by truck, within a hundred miles of out facilities."
You also need to add the transportation cost of getting the corn to California. The Basis for PEIX is $1.28/bushel.
FYI the production margin for PEIX today (according to the sources I use to calculate it) hit $0.735. It's dropped substantially in the past 3 days That's calculated using the formula PEIX provided in their June presentation. It accounts for co-products, LA terminal prices and the cost of corn plus basis.
The formula is included and fully explained in the Notes to the weekly summary I post every Monday.
Keep in mind that the formula uses assumed factors and that those factors actually vary in practice. Also keep in mind that it uses the CBOT front-month corn price, whereas PEIX buys their corn at spot prices. Also keep in mind that any application of that number can not factor in when actual sales and purchases are made. At best, any production margin (or crush margin) is an approximation for the purpose of estimating earnings. Also keep in mind that it does not price in Plant and other operating costs. It's only a gross profit number based on the costs of materials vs sale price of goods.
Finally, it only accounts for plant operations. Kinergy is another entirely different animal. Some of Kinergy's profit margins are fixed (indexed, prearragned sales) whereas some are most definitely not (the buying and re-selling of ethanol).
If I didn't know better, I'd swear this is a full court press to get the share price down to the end of Q2 price for the end of Q3 (but of course it has more to do with the drop in west coast prices again yesterday and the big dip in overall prices this morning). I hope we get some info on the number of warrants still remaining from the conference presentation tomorrow, even if I won't be able to catch it live. More than that though, I hope we get some stability in the price of ethanol soon. It's not following corn at this point.
Look what new crop corn did in Iowa today. Looks like it's down $0.40 - $0.45 across the state.
http://www.agweb.com/markets/cash_grain_bids.aspx
If this is the case across other states as well, there's no way in hell that I see Brazil ethanol being any kind of a threat in he foreseeable future. If anything, it's going to be the other way around. I suspect that right now, the US has the cheapest ethanol for export on the market.
The Imperial Resources presentation will be webcast. It may have some impact depending on the materials included. If, for example, it includes a graph of 3rd quarter production margins to date (similar to the one included in the June presentation), it may well wake a few people up.
The rest of the conferences aren't available to the general public, so their impact will only be limited to any institutional buying that they might generate. That could well be going on today. If it's the case, they'll be crafty about it. There could well be an impact, just not one we'd be able to identify.
A few interesting observations.
CBOT December corn futures gained 4.5 cents today. This is also the day the nearby futures switched over from September to December futures, resulting in an overall gain of 11.4 cents if you just plug in the nearby futures value into the production margin calculation (BTW, ethanol nearby futures switched over from September to October on the 5th).
Meanwhile, over on the MGEX, the spot price for corn remained unchanged @ $3.165
Another interesting thought: The average CBOT corn futures price in August was $3.56. Meanwhile the MGEX spot average price for August was $3.36
Iowa especially. They really got hit hard, seeing a weekly low production margin they haven't seen since the 2nd-last week of Q2.
PEIX on the other hand saw daily values on Thursday and Friday that are still within a couple cents of what they saw at one point in mid-July ($0.986), and a weekly value that isn't any lower than the beginning of the quarter, and still well above the weekly values they saw the last 2 weeks of Q2 (I have PEIX @ $0.93 & $0.91 to close out Q2).
No doubt the bears are all over it though, and will push it for everything it's worth.
On a completely different note, looks like someone finally stuck a pin in Tesla.
I think the market is illogical a lot of the time.
I think there's a lot of traders in PEIX right now that know next to nothing about the ethanol industry and are highly reactive to commodity prices (corn and ethanol), but don't actually understand how to equate them in terms of profitability.
I think that the market is still treating PEIX as a company emerging from bankruptcy, despite the fact that they eliminated a massive debt load in the past year, bought back all but the remaining 4% of plant ownership, all but eliminated the massive debt carrying costs that weighed them down for so long, they're now net cash positive, have a healthy cash balance that's going daily, and are now operating at 100% capacity with bringing Madera online.
I know that three separate analyst firms have initiated or updated their coverage, providing price targets for PEIX of $28, $29 & $30.
I know that the market is in a constant state of flux, and is easily influenced by irrational thought.
I know the ethanol industry is in a constant state of flux, and that at the present time it seems to be hypersensitive to any change, often overreacting to events in a way that's just not even close to proportional to any potential impact a development might have.
I know that there are large interests that will push those market exaggerations to the max in order to maximize the profit potential, often based on extremely short time horizons.
I know that the only way to evaluate that, given how factors vary for different companies depending on their regional location, whether they hedge or not, and a number of other factors that can influence the profitability of an individual plant, is to conduct the due diligence required.
I know if I don't pick the apples on my tree soon, a frost will get them.
I don't think I've ever stated that I think the share price of PEIX will be $xx at a certain point in the future, and I'm not about to start now. While I do openly share the results of a lot of the due diligence I carry out, I try not to predict what I personally think the price will be at some point in the future. Not only is the market is just too damned illogical to allow that, things can and do change - especially over a 6-8 week period like now before the Q3 numbers even come out.
I also tend to keep my positions to myself and not disclose what my holdings are. The reason is very simple: I don't want anyone to ever base their investment decisions on what I think or don't think. I abhor the herd mentality that follow the likes of some who prey on ignorance and use their herd following to manipulate markets and advance their own financial gains and personal agendas.
The weekly numbers
I wonder when the market will realize that ethanol producers (including PEIX) are not exactly losing money here. Returns are still very healthy. Remember too that the PEIX numbers do not include the further feed stock reduction costs due to the inclusion of surplus sugar and waste wine.
Click on the image to see a full version on a separate web page.
For last week I've got $1.028
For the quarter I've got $1.08
Something to keep in mind is that's without factoring in sugar at Magic Valley and Boardman, so it would be actually higher than that.
Usually the slides aren't available until the presentation on these webcast presentations, and the audio is then available afterwards.
Ok, so Imperial Capital’s 8th Annual Global Opportunities Conference on Thursday will be webcast. So far it looks like the only one out of the three that will be. The link is on the website.The link is on the PEIX website.
You're spot on with your last several posts. This is all about Tullow receiving assurance from Guinea that they won't be affected by any action taken by Guinea following the outcome of either the DOJ or their own investigation. The 10-K once again makes that very clear in numerous places. Until that assurance is received, there will be no well. It's first stated in the 3rd paragraph of Item 1, and subsequently restated in at least dozen other places in the document:
The Consortium planned to drill the exploration well in ultra-deepwater in the first half of calendar 2014. On March 11, 2014 Tullow unilaterally asserted its claim that there had been a Force Majeure event under the PSC with the Government of Guinea, the Joint Operating Agreement (“JOA”) between Dana, Tullow and us and the SPA. Tullow stated in its notice that the decisions by the DOJ and the SEC to open investigations into our activities in obtaining and retaining the Concession rights constituted a Force Majeure event under the terms of the PSC, JOA and SPA. Tullow unilaterally lifted its declaration of Force Majeure effective May 3, 2014. Diligent efforts are being made to satisfy the conditions to resuming petroleum operations which include clarification that the investigations of Hyperdynamics will not adversely affect operations under the PSC. We cannot predict the timing or outcome of these efforts.
The added twist is that the Ebola situation has now compounded things:
Should the Ebola virus continue to spread or not be satisfactorily contained in Guinea or surrounding countries, drilling plans could be delayed, or interrupted after commencement. Any changes to drilling operations could significantly increase costs of operations. The planned drilling activities of the Consortium require access to the Conakry airport and other infrastructure in Guinea. Several countries have announced travel bans to the neighboring countries of Sierra Leone and Liberia. If bans are extended to Guinea, or contractors or personnel refuse to travel there, the Consortium could be adversely affected. If services are obtained, costs associated with those services could be significantly higher than planned which will have a material adverse effect on our business, results of operations, and future cash flow.
I noticed a couple other items as well in the 10-K of importance: First, $14.1M of the $100M net costs for the well carry have already been expended. From paragraph 2 of Item 1:
Pursuant to the Share Purchase Agreement (“SPA”) between Tullow and us, Tullow agreed to pay all of our participating interest share of expenditures associated with joint operations in the Concession up to a gross expenditure cap of $100 million incurred during the carry period that began on September 21, 2013. From September 2013 until June 30, 2014, costs applied against the $100 million carry were $14.1 million.
Second, from the last paragraph of the the PSC (page 2):
In July of 2013, a proposal was submitted for a Second Amendment to the PSC (the “Second PSC Amendment”) to the Government of Guinea formally adding Tullow as a Contractor to the PSC as well as addressing other administrative issues. The Consortium and the Government of Guinea continue to discuss the proposed terms of the Second PSC Amendment.
What that ultimately means is open to speculation, however I find it interesting that the terms of adding Tullow and appointing them operator are not finalized, and that this "proposal" was submitted in July 2013, followed by HDY supposedly becoming aware of the GOJ investigation in September. Especially in light of the current situation with Tullow seeking assurance from Guinea that they won't be impacted by any consequences that could arise in light of any findings by the DOJ investigation. As I've also said in the past, I also suspect that Dana has always been on Tullow's side with this issue. They too stand to be impacted, and I'm sure any negotiated immunity for Tullow would also be extended to Dana.
The rest of the document reads as one big warning that some serious form of dilution is coming. But then I think that was already pretty obvious. As far as staffing, it's pretty clear from a number of statements in the 10-K that they intend to protect the jobs of those who remain, come hell or high water. I think I'll continue to watch from the sidelines for the foreseeable future.
Friday's PFL daily report is a duplicate of Thursday's, right down to the reported previous day's values. It's not the first time I suspected some of their numbers were wrong, but this time they're ALL wrong.
If anyone has today's LA terminal price for ethanol from a different source, it would be appreciated. Thanks.
One last thought on yesterday and today's absurdity:
"Under the program, known as Reintegra, producers will receive a tax credit worth 0.3 percent of their exports."
source
Compare that to what the price of corn has done in the past week. Today alone, it fell over 2%. Brazil already couldn't compete with US ethanol, including the California market, where prices were in the $2.30 to $2.40 range for most of the quarter. A 0.3% credit on $2.30 would only give them $0.007/gallon. Less than a penny per gallon.
This was a desperation ploy to sway voters by an incumbent Brazilian President about to lose an election. It amounts to nothing. It isn't going to turn around a severely depressed Brazilian ethanol industry in a country that already incurs a $20 BILLION debt through subsidizing the price of gasoline, it isn't going to save a failing Brazilian President and it isn't going have any impact on the US ethanol industry.
In the short term, I wonder if PEIX can take advantage of another sugar auction this fall? That would be awesome :D
It will be interesting what we hear coming out of the conference presentations next week. Meanwhile, I've got a boatload of dry powder. I won't mess around with Sept. options, but I'm not shy when it comes January (and now April) deep in the money calls.
News loves an attention-getting headline, doesn't it? Few read that far into an article, and the shills for the shorts will only pump the headlines, not the story. I suspect the raid will continue for a day or two yet. Fine by me if those who are governed by fear get sucked into by the bears into shorting, I'll be buying. They'll get their wake-up call when the Q3 numbers come out.
It's just like the fear mongering around the weather last week. Institutional traders know the real story, but will gladly play the panic and herd the ignorant into selling well below a realistic share value. It's even referred to in this story for those who actually read that far (oops, the finally get around to mentioning that small fact a week late, and still buried at the bottom of the article)
"Recent weather mostly has remained favorable for farmers, with broad stretches of the Midwest and northern Great Plains getting more rain than usual in August and damaging heat waves largely absent. While the threat of an early frost has arisen in patches of the upper Midwest in recent days, many traders expect that cold weather could do only marginal damage to domestic crops at this point in the growing season."
Grain, Soybean Futures Fall to 4-Year Lows on Record Crop Forecasts
The really blatant manipulation is pulled off by the likes of The Street and Kramer's gang of thugs.
Check this fear mongering in the lead-off to their latest article
"NEW YORK (TheStreet) --Pacific Ethanol (PEIX_) fell 7.4% to $21.31 Thursday, and continues to fall in after-hours trading, on fears that the U.S. ethanol industry could soon see an increase in Brazilian imports."
Prices aren't falling in the aftermarket. A few hundred shares worth of filled VWAP orders crossed the wire after the bell, that's all.What are VWAP orders?
In fact, even Kramer and his thugs don't believe their own spew. They just want to stampede people into selling so they can buy cheap. Those who read the rest of that very same article instead of panicking will come across this:
We rate PACIFIC ETHANOL INC (PEIX) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
* The revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 37.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
* PEIX's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, PEIX has a quick ratio of 2.07, which demonstrates the ability of the company to cover short-term liquidity needs.
* PACIFIC ETHANOL INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, PACIFIC ETHANOL INC continued to lose money by earning -$0.39 versus -$2.70 in the prior year. This year, the market expects an improvement in earnings ($3.29 versus -$0.39).
* The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 1381.6% when compared to the same quarter one year prior, rising from $1.05 million to $15.57 million.
* Net operating cash flow has significantly increased by 950.35% to $28.45 million when compared to the same quarter last year. In addition, PACIFIC ETHANOL INC has also vastly surpassed the industry average cash flow growth rate of -5.22%.
Corn Production Up 3 Percent from August Forecast
Released September 11, 2014, by the National Agricultural Statistics Service (NASS), Agricultural Statistics Board, United States Department of Agriculture (USDA).
Corn production is forecast at 14.4 billion bushels, up 3 percent from both the August forecast and from 2013. Based on conditions as of September 1, yields are expected to average 171.7 bushels per acre, up 4.3 bushels from the August forecast and 12.9 bushels above the 2013 average. If realized, this will be the highest yield and production on record for the United States.
USDA Sept 11th crop forecast
West coast prices are published daily by PFL
click on the daily report link
I teach a course in the Fall, so I wasn't around to take advantage of the excellent buying opportunity. Congrats to those who did. I see this is nothing more than short term commodities volatility.
With the 4 upcoming conference presentations next week, we should know where we stand with the remaining warrants going into the last week of the quarter. This will be good information to know.
We might very well also see an updated version of the production margin chart that was presented in late June at the Global Hunter Securities 100 Energy Conference. While PEIX notes that the availability of a webcast will vary with the facilities of each conference, at a minimum we should get access to the slides.
Click on Trades in the Data Tools drop-down menu on the IHub menu bar if what you want is the daily buy/sell volume. It's 15 minute delayed, but it's free. Not that I'm sure it means much on days when HFT's trading with themselves accounts for most of the activity on days like today.
100 100 100 100 100 100 100 100 100 100 100 100 100
First farmer sales of California corn were reported this week. They came in $0.91 under the Turlock price ($7.98 vs $ 8.87/cwt. or $4.47 vs $4.98/bushel).
That price is from Tulare, about an hour down the road from the Madera Plant, and 2 1/2 hours from Stockton.
USDA weekly report / California
(edit) Makes a lot of sense, actually. And if it is the case, I suspect we'll see another good run once they're gone :D
(edit) And if the production margin numbers stay on track for today and tomorrow, any run would be fueled by the best production margin numbers for the quarter. Here's the crush margin graph from PFL, current as of the end of yesterday
I was surprised at the drop in the west coast price yesterday, it pretty much cancelled out any potential gain from the drop in corn. It acted like it was in anticipation of an increase in west coast inventories, not a drop.
Perhaps it'll bounce back today in response.
Nonetheless, the margins have been very healthy to date this week, coming in nicely above last week's average so far.
I see the Uncommon Equities upgrade yesterday set a price target of $30.00
Source
Wade, for the year to date the 9% 3rd party interest siphoned off $3.403M from the bottom line (see the Consolidated Statements of Operations in the 10-Q). So ($3.403/9)*5 = $1.89M that would not have been paid out for the year to date.
Pushing 3.40 since you posted that. I wonder if this is mostly a reaction to the weather across the corn belt (warm, sunny, and forecast to stay that way).
I think this probably mirrors the PEIX situation very well. Now is not the time to consider buying up plants, as pretty much anyone with a clue in the ethanol production industry is turning a profit right now. Now is the time to tighten up efficiencies and bank a war chest. The industry, being what it is, will present opportunities to expand when margins tighten up and those companies still carrying excessive debt can no longer produce black ink.
IMO PEIX has been doing all the right things - eliminating debt (and with it, interest payments), investing in efficiency upgrades to it's own plants, and accumulating a bank roll that will allow them to expand in the future, either with a straight-up cash investment, or alternatively, by being able to finance those purchases on very favorable terms.
I could be way off base with this, but I suspect that PEIX wants to keep enough liquidity on hand in their bank account to eliminate the need to rely on lines of credit to cover operations in the future. If that's the case, I suspect that yesterday's purchase was governed by the accumulation of enough cash in excess of that liquidity to fund the buy-back. I would further speculate the same would apply to buying back the remaining 4%, assuming they can negotiate agreeable terms.
What was very interesting is how corn on the MGEX foreshadowed this yesterday, it dropped 8.25 cents.
Jessi, I can tell you that the PEIX production margin was up yesterday to $1.194. I can tell you that corn is falling off a cliff this morning. Beyond that, I have always been at a loss to predict the short term reactions of the market - like this morning's sell off. To me this morning looks like the short side managed to stampede some traders into selling, who likely don't even know the relationship of corn prices to ethanol and only saw ethanol drop 3 cents. (that or they somehow think PEIX is related to Apple :/ )
Predicting how the market will react in the short term to a very positive move in buying up another 5% of plant ownership is completely beyond me. Sorry.
BTW I say positive for a very simple reason. As of the last 10-Q, the plants were valued at approx $155M net to PEIX. Remember, that was for 91% ownership, or $1.7M per percent. A 5% purchase would thus be valued @ $8.5M, so the price paid would certainly be well below PEIX's book value, let alone an open market purchase in this current ethanol environment.
Corn is getting absolutely slaughtered this morning. I hope people aren't selling because ethanol dropped 3 cents in response
September corn