Economist estimates ethanol plants' shutdown price for corn

Ethanol Producer Magazine
By Kris Bevill
May 24, 2012

A recent analysis conducted by University of Illinois agriculture economics professor Scott Irwin estimates that, on average, ethanol plants will not be able to pay more than $6.75 per bushel for corn this summer without running in the red and risk having to idle their facilities.

In the analysis, titled “Rationing Old Corn Crop and Ethanol Shutdown Prices,” Irwin bases his analysis on an average 100 MMgy Iowa ethanol plant which produces 2.8 gallons of ethanol and 17 pounds of DDGS for each bushel of corn received. In order to calculate the maximum price the facility can pay for corn before reaching the shutdown point—the point at which revenues no longer cover the production costs—he considers the price received for ethanol and DDGS and subtracts 59 cents per bushel of corn to cover non-corn variable costs. For example, in early December, Iowa ethanol plants were receiving $2.70 per gallon for ethanol and $198.25 per ton for DDGS, totaling $9.25 in revenue per bushel of corn. After subtracting the non-corn variable amount, the maximum price Irwin’s model plant could have paid for corn at that time was $8.66 per bushel. After adjusting for ethanol and distillers grains price changes, the shutdown price for Irwin’s model plant on May 18 was $6.71 per bushel and he estimates that price will stay about the over the summer months.

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