Valero Energy Corp., citing improved margins, has restarted two ethanol plants in the Midwest that have been shuttered since June.
“We had expected that when we closed the plants in June that by the harvest, corn prices would come down somewhat and that would improve margins,” Valero spokesman Bill Day said. “And that’s what happened. Margins have improved to the point that it’s feasible for the plants to be in operation.”
San Antonio-based oil refiner and marketer Valero owns 10 ethanol plants in the Midwest that can produce 1.2 billion gallons of the fuel annually. The plants being restarted are in Linden, Ind., and Albion, Neb.
Jason Hill, professor of bioproducts and biosystems engineering at the University of Minnesota, said the price of gasoline affects the price of ethanol.
“If the price of gasoline is rising, they can sell ethanol for more,” Hill said. “And essentially the two major inputs are the price of corn and the price of natural gas. And natural gas is cheap.”
The nation’s average gasoline price has jumped 13.4 cents in the last month, to $3.85 a gallon, according to AAA.
Geoff Cooper, a St. Louis-based vice president of research and analysis at the Renewable Fuels Association, said the two Valero plants “closed as a direct response to the run-up in corn prices that began in June.”
Although corn for December delivery on Wednesday advanced 16.5 cents, or 2.2 percent, to $7.565 a bushel in Chicago, the price the day before touched $7.39, the lowest price for the most active contract since July 13, Bloomberg News reported. Corn futures prices hit a record $8.387 a bushel on Aug. 21.
A decline in corn prices typically happens at this time of year, Cooper said. “Harvest has really ramped up, and we’re fully under way in the heart of the Corn Belt.”
Prices also are being affected by reports from some farmers that the corn yields are higher than anticipated.
“We heard so much about the drought and damage, but in the last week, there were reports of farmers being surprised,” Cooper said. “So if this crop turns out to be larger than expected, that would put downward pressure on prices.”