Indiana Grain Company, LLC

Posted: 03/14/10

By: tomgrisafi

Ethanol, the commodity that cost Bill Gates more than $44 million the last time prices collapsed, is poised to rally as much as 20 percent as the fastest drop since 2008 spurs demand.

Falling corn prices and record ethanol supplies have driven the price down more than 17 percent in three months to $1.585 a gallon Friday, its worst run since 2008's fourth quarter. It will average $1.96 a gallon at the peak of the U.S. summer driving season as refiners from Valero Energy to Sunoco mix more into gasoline made from increasingly pricey oil, according to the median of 10 analyst estimates compiled by Bloomberg.

Four years after George W. Bush made ethanol a centerpiece of his presidency's push to cut dependence on foreign oil, three of the biggest producers have sought bankruptcy protection and prices have fallen 61 percent from their mid-2006 record. Now demand is rebounding because ethanol is almost 66 cents cheaper than gasoline, the biggest discount in 14 months. The potential gains prompted Valero and Sunoco to buy failed distilleries.

“Margins today are better than a year ago, absolutely,” said Todd Becker, the chief executive officer of Green Plains Renewable Energy, the fourth biggest producer, in an interview. “The industry is on pretty good footing for 2010.”

The Omaha, Nebraska company reported a record fourth-quarter profit of $23.1 million last month, up from a $1.85 million loss a year ago. Green Plains sold new shares in March, the first producer to do so in almost two years.

Source: Bloomberg

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