Profit Windfall For Ethanol Producers
Ethanol producers are in for sweet profits the next few quarters. Losses will swing to profits and profits will grow. The reasoning for this is simple. The price of the commodity corn has collapsed while the price of ethanol have remained relatively unchanged. Companies like Potash Corp./Saskatchewan (USA) (NYSE:POT), Monsanto Company (Public, NYSE:MON) and The Mosaic Company (NYSE:MOS) have commented on this drop in corn prices recently.
Over the last year, due to the soaring price of corn, farmers over planted. With excess corn, prices have collapsed with many other commodities. This leaves ethanol producers loving their new super margin spike. The beauty of this difference is plainly the cost of the corn and the continued strength in the price of ethanol. Due to growing demand in the United States and abroad, ethanol has kept its price steady compared to corn. This should mean major profits for stocks like Pacific Ethanol Inc (NASDAQ:PEIX).
Pacific Ethanol reports earnings today after the market closes. While the full effect of the drop in corn will not be felt, we should hear positive comments from the company on the current quarter. Pacific Ethanol has been losing money. The stock price has reflected a very poor outlook as it trades at $0.328, +0.014 (+4.50%) . However, should they maximize the margin increase, profits may grow very quickly.