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Updated Corn Ethanol Economics

Posted on June 25, 2008

Executive Summary: The current cost to produce a gallon of ethanol is approximately $3/gal. The current price of ethanol is $2.86/gal, which explains why ethanol producers are shutting down. If corn and natural gas prices remain high, I think ethanol has to rise to something like $3.40-$3.60/gal to make it worthwhile to ethanol producers. So, if I was a commmodities investor, I would probably go long ethanol right now. The only risk factors I can see - given that there is a mandated (and rising) demand for ethanol - is if corn or natural gas prices collapse. The other remote possibility is tha...

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