Merrill Lynch says ethanol market “bottoming out”; prices to rise, margins stay weak as feedstocks also projected to rise

A report by Merrill Lynch has projected that the US ethanol market is bottoming out, and projects an increase in ethanol prices as “mandated targets will continue to push up consumption against a constrained supply environment,” the brokerage wrote in a recent report.

“Limited access to credit and low, volatile refining margins are curbing biofuels output,” the firm said in reducing its 2009 projections for ethanol production by 200,000 barrels per day to 1.9 million, or 29.17 billion gallons. The company projected that recoveries in energy prices would generally be translated into higher margins for feedstocks such as corn, with biofuel margins remaining weak, but said that if oil prices head north of $60 per barrel the industry could reach break even “without government help”.

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