This from AAE announcement today. So what excuse will they use to pump up ag prices now?
The fundamentals of the global biofuels industry continued to see extensive change over the December quarter. While world energy prices have escalated rapidly to where crude black oil prices have peaked at over US$100 per barrel, global grain and biofuels feedstock prices experienced even greater rate of rise over the same period. Biofuels production operating margins during the period were squeezed forcing numerous closures of operating facilities globally. In the AAE target geographic markets of the United States, Europe and Australia, the major portion of biodiesel and a number of ethanol facilities have been shut or operated at well below throughput capacity. The change in industry commodity price fundamentals over the past 2 years is outlined in the table below. United States 2006 2007 Corn US$/bushel $2.00-$3.00 $3.80-$4.80 Ethanol $/gallon $2.50-$3.50 $1.50-$2.20 Soy Oil US$/lb $0.23-$0.28 $0.45-$0.55 Biodiesel US$/gallon $2.70-$3.20 $3.40-$4.00 Australia 2006 2007 Wheat AUD$/tonne $200-$250 $260-$460 Ethanol AUD$/litre $0.70-$0.80* $0.80-$0.95* Canola AUD$/tonne $500-$530 $620-$650 Tallow AUD$/tonne $350-$450 $900-$1,000 Biodiesel AUD$/litre $0.82-$0.86 $1.15-$1.20 *Terminal Gate Price (TGP) less $0.40 + GST Europe 2006 2007 Rapeseed €/tonne €230-€270 €230-€410 Rape Biodiesel €/tonne €750-€800 €700-€1000 Wheat €/tonne €110-€160 €150-€290 Corn €/tonne €120-€160 €150-€270 Page 2 of 12 In most instances these commodity prices represent all time high level and present a dilemma for any project developer and operator in forecasting the future outlook. In the assessment of the future and ongoing position of the biofuels industry, it is difficult to identify any reliable indicator with which to forecast future outcome. History reflects that during the past few years, all recognized forecasts across the industry have been grossly unreliable and inaccurate. For instance, in October 2007, as reported in the previous AAE Quarterly, soy oil price was at a perceived cyclic industry high of US$0.40-0.41 per pound. With substantial global stockpiles, significantly reduced biofuels demand and pressure from the food industry, analysts predicted a decline of soy oil price in late 2007/early 2008. However, over the past quarter the soy oil price has actually risen to all time high figures of US$0.54 per pound, very much contrary to industry generated information. The soy oil price appears not driven by the United States or global biodiesel industry at this time as substantial parts of biodiesel production in the United States is shut down or operating at well below capacity with new forecast production not proceeding as predicted. When the increased commodity costs are put into the project financial model the results are that the EBITDA returns reduce from a robust financial investment, based on the 2006 figures, to breakeven or negative margins on the higher commodity prices in late 2007. The scenario has seen investment (debt and equity) for new projects in the global biofuels industry dry up as the sector has experienced significant reduction in equity valuations and failure of companies to meet forecasts. The biofuels sector, including AAE, has experienced a sharp decline in stock price during this period.
