Here's a bit of color on ethanol profitability from the mgmt of Valero (VLO), which spoke on the topic at a few places during the VLO earnings call yesterday:
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The ethanol segment generated $158 million of operating income in the fourth quarter of 2014 versus $269 million in the fourth quarter of 2013. The decrease in Ethanol segment operating income was mainly due to a $0.31 per gallon decrease in gross margin, driven by lower gasoline and ethanol prices with relatively stable corn prices.
[...]
For ethanol operations in the first quarter, we expect total production volumes of 3.7 million gallons per day. And operating expenses should average $0.37 per gallon, which includes $0.04 per gallon for non-cash cost such as depreciation and amortization.
[...]
Mohit Bhardwaj - Citigroup
The question is on ethanol. You guys just talked about ethanol market in 2015, obviously in 2014 ethanol was a big support and you guys made like $700 million to $800 million in operating margin. Moving to 2015 it looks like the corn prices have kind of held up and ethanol prices are coming down based on the global economics, maybe just talk about that?
Martin Parrish - Vice President, Alternative Fuels
Ethanol margins are likely to remain low in the $50 crude environment. And we don't know how long crude is going to stay at these prices obviously. What we do know is we have the best assets in the ethanol industry in the U.S. and we're in an advantaged location and we know we're not marginal producer. So we expect to weather this time.
Mohit Bhardwaj - Citigroup
And do you expect to remain in the positive territory or do you think right now you're seeing negative markets [probably should read: margins] in that?
Martin Parrish - Vice President, Alternative Fuels
I think it's going to chop around some, but we think overall it will be positive with our fleet.
Joseph Gorder - Chairman, President and Chief Executive Officer
And it's positive today, yes.
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