by Chrysa Glystra (S&P Global Platts) The hot and dry weather that has swept across Northwest Europe over the summer months has seen grains prices skyrocket but has also increased demand for animal feed, including dried distillers grains, a by-product of ethanol production.
This has considerably increased feedstock costs for European ethanol producers who have been faced with a dire margin environment for most of the year.
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However, some respite for producers is coming in the form of increased prices for DDGs, as the drought has also resulted in increased feed demand.
DDGs have also benefited from tightness in the EU rape meal market, due to EU crushers switching away from rapeseed to soybeans, which offer a better crush margin since the imposition of Chinese import tariffs on US soybeans.
Expensive rape meal has driven up prices for the entire European feed complex and combined with increased demand, EU DDG prices have firmed considerably, providing a buffer to ethanol margins.
Increased revenues from by-products aside, some ethanol producers have also been able to switch their feedstock base from wheat to corn, so real margins could still end up positive or at least break even. READ MORE