The Department of Energy's latest monthly ethanol output report for March, released earlier this week, showed another record output of 499.5 million gallons-up 46 million vs. February because of three additional operating days. Interestingly, the latest daily output rate slipped by 2,000 barrels to 384,000 during March; our calculated U.S. ethanol plant capacity utilization pace decreased by 1.4% to 104.2% when using Renewable Fuel Association (RFA) data for plants opened during the month.  However, another positive was the decline in U.S. ethanol stocks of 220,000 barrels to 8.53 million vs. a 1.33 million barrel increase last year-suggesting this year's ethanol demand continues to expand ahead of the seasonal maintenance downtime in April that has occurred the past few years.

After adjusting for last month's revised ethanol plant data from POET, the new corporate name for Broin Companies, two additional plants (in IN and OH) have been added to the RFA's plant list of biorefineries that are now under construction. This brings POET's current operating output to 1.07 billion gallons, with 270 million under construction and 205 million in development for output during the 2008/09 crop year.

During May, four plants began operations, bringing 275 million gallons of new capacity to the industry that now totals 6.2 billion gallons. This is encouraging, but a backlog of plant construction due to last winter's cold temperatures and reports of component manufacturing delays has likely curtailed this crop-year's corn demand by 30-40 million bushels. Current strong gasoline prices and processing margins suggest, however, that 2007/08 corn demand will be 3.4-3.5 billion bushels and continue to expand in 2008/09. After an erratic spring planting period that has kept corn prices in a trading range, weather during corn's upcoming pollination will determine if December corn moves above $4 and challenges last winter's $4.30 highs. This week's swing to the topside of the range has brought our old-crop sales to 80% and our new-crop marketing coverage to 25%-30%. With 2007/08 U.S. yield potential at 5 bushels on either side of the USDA's current 150 level, this summer's prices will likely be very volatile.