The Controllable and Uncontrollable

By Susanne Retka Schill | September 23, 2010
The nitty-gritty details of keeping an ethanol plant running smoothly and the fermentation process healthy are always important. In this issue, Associate Editor Kris Bevill takes a look at new methods being developed to make monitoring yeast activity faster and more accurate. For our cover story, Associate Editor Holly Jessen takes a look at another trend in ethanol plant management—hiring in-house engineers to help optimize processes and investigate potential upgrades. Ideally, an engineer working with experienced plant personnel should anticipate problems before they become costly breakdowns. Every step made to fine tune the operations within control can insure a plant's smooth operations, providing a solid base in the face of the uncontrollable.

Policy is one of those areas outside the control of a plant's management team. There's the potential that Washington gridlock will put the ethanol tax credit into the same limbo as the biodiesel credit, in spite of the hard work being done on ethanol's behalf by many individuals and organizations. One plant manager I visited with recently said he would look for opportunities to hedge a profit of even a nickel rather than risk what may happen after Dec. 31.

Market risk is better understood than policy uncertainty and risk management teams have several tools available to hedge. Those teams may be understandably a bit nervous this fall. While ethanol prices are up, so are corn prices and the speculators are back. Ironically, once again grain market advances are being led by wheat crop failures elsewhere in the world. What is not needed now is an event like the Iowa floods of a couple summers ago or the runaway oil prices that together created a perfect storm and turned what should have been a short-lived weather market into a wild ride for all. Having yet another record-busting corn crop in the field, record soybean yields and abundant U.S. wheat supplies have kept a countervailing downward pressure on the U.S. market. The stage is set, however, for returned volatility should the unexpected happen.