Ethanol Prices and Net Returns

Ethanol prices vary, over time, with changes in ethanol and corn pro­duction decisions, political statements from Washington regarding fuel policy, and expectations regarding the potential adoption of a national renewable fuels standard. These factors and others have caused moderate volatility in ethanol prices in recent years. Over the longer term, ethanol prices have been less volatile. For example, from January 1995 through May 2002, the average price of ethanol delivered to San Francisco ranged from $0.90 to $1.85/gal, with a mean value of $1.20/gal (16).

The net returns from producing ethanol are estimated by subtracting the adjusted production costs from the expected total revenue. We use a price of $1.20/gal of ethanol to represent a "base-case" scenario. Given that price, the estimated net returns range from a negative $5.92 ($1.20-$7.12)/ gal using California grapes to a negative $0.06 ($1.20-$1.26)/gal, using Midwestern corn.

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