Due to an Increase in Costs but a Decline in Product Prices, Corn Alcohol Producers Have Fallen into Loss

By CnAgri2018-11-22 10:44:38 Print Since November, corn alcohol processing margins have witnessed a linear decrease. By middle November, the average processing margins of corn alcohol producers in the main producing areas had declined to below the break-even point. In north China and Huang-Huai Region, the loss were RMB 400/MT; in the northeast, processing margins also decreased to RMB 200/MT, both RMB 400/MT less than those of early November. The main reasons are as follows:
 
(1) Owing to a great increase in corn costs, further processing companies are gradually raising purchase prices. Northern farmers sell grain at a slow pace, continuous rainfall in north China is not good for purchasing and further processing companies have low stocks, so purchase prices were raised. In the northeast, most of companies use temporarily-stored corn auctioned, but in north China and Huang-Hai Region, the companies mainly purchase market-oriented corn, whose corn costs all are upward of RMB 2,000/MT.
 
(2) Corn alcohol prices declined. International crude oil prices in November kept lowering, with a decline of more 25%, which brings relatively great pressure to domestic fuel alcohol market and leads to a decline of RMB 200-300/MT in corn alcohol prices in middle November compared with early November.
 
(3) Corn byproduct prices also lowered obviously. With frequent exchanges of leadership between China and the U.S. since November, the tensions are relieved, and the imports of products such as soybean and DDGS possibly would increase, so soybean meal prices started to fall from a high level, which pushed down protein feed prices. In middle November, average DDGS prices in the main producing areas were RMB 150/MT less than a high in earlier stage.