The ethanol industry has a lot of product in storage right now, according to Garrett Brown, merchandiser for Dakota Spirit AgEnergy, an ethanol plant in Spiritwood Township. “Overall, the (U.S.) supplies have increased and the (profit) margins decreased,” Brown said. “Production is up and seasonal gas use is down.”
Brown spoke to about 75 farmers during a seminar at the Winter Ag & Construction Expo Tuesday at the Jamestown Civic Center.
According to the U.S. Energy Information Administration, the stockpile of fuel ethanol was 21.1 million barrels as of Jan. 1, up from 18.8 million barrels a year earlier, a 12 percent increase.
Brown said the ethanol industry was trying to cut the supply of its product to match the demand. The industry has been growing and recently surpassed the 1 million barrels-per-day capacity.
Dakota Spirit AgEnergy is still running at full capacity. Dakota Spirit AgEnergy began operating in May and produces about 65 million gallons of ethanol per year. The plant utilizes about 70 truckloads of corn each day as its raw material.
“It is different than typical ethanol plants,” Brown said. “It has no boiler and gets its steam from across the fence at Spiritwood Station.”
That allows Dakota Spirit AgEnergy to operate more efficiently than other ethanol plants, he said.
Spiritwood Station is a coal-fired electrical generating plant that also provides steam to Cargill Malt, which processes barley into malt for beer production.
Dakota Spirit AgEnergy is located in the Spiritwood Energy Park Association industrial park. Spiritwood Energy Park Association is attempting to recruit additional businesses that could utilize steam from Spiritwood Station and the rail and road transportation available at the park.
Corn exports from the U.S. are also down, Brown said. For example, Japan purchased about one-third as much corn in 2015 as it had in 2014.
“The loss of export markets make the American-end user of the corn more important,” Brown said.
These market factors have produced corn prices that are currently nearly as low as anytime in recent years. Corn rose between 4 and 5 cents per bushel this week on a revised estimate that reduced the amount of corn harvested in 2015 by 50 million bushels. The estimate did not reduce the amount of corn in storage at the end of 2015.
Producers of corn and ethanol have to play a waiting game until market conditions improve, Brown said.
“We have to wait out the (business) environment,” he said. “Wait for the demand to improve.”