September's U.S. monthly ethanol output, released by the energy department this week, reported the first month of corn's 2007/08 crop year had another daily record output of 441,000 barrels per day. But total production was down 10 million to 555.3 million gallons, because of one less operating day. Low output prices also weaken the U.S. ethanol plant capacity utilization for that month to 99.8% from 102.6 in August, when utilizing the Renewable Fuel Association's (RFA) operating plant list. But 254 million gallons of new bio-refinery capacity did come online during September. With ethanol hovering around $1.50 per gallon earlier this fall, U.S. ethanol stocks also continued to rise to another record level of 11.5 million barrels (up 1.5 million barrels from the previous month), but this stocks level doesn't seem too excessive with 31% yearly rise in output over 2006.

During November, three new bio-refineries came online, bringing the industry's overall plant capacity to 7.2 billion gallons. But for the second month in a row, no new ethanol plants were added to RFA's plants under construction list. (One 35 million gallon plant construction site was suspended this month.) But the big news within the ethanol industry was the merger announcement this week between VeraSun and U.S. BioEnergy (the third and fourth largest ethanol producers in the U.S.), which could create the largest U.S. producer-if the current seven unfinished plants become operational in the next year.

The other buzz that occurred this week for ethanol was the possible reinvigorating of the 2007 Energy Bill, when the U.S. House crafted a more definitive energy proposal than their early effort this year. Their total renewable fuel standard (RFS) level isn't as high at 20.5 million gallon vs. 36 million, but the House version would be achieved by 2015 vs. the Senate's 2022 timeline. The House version also includes a so-called "advanced" category of 5.5 billion gallon from cellulosic and biodiesel sources. The House bill also has 9.5 billion vs. 8.5 billion 2008 Senate RFS. If an energy bill with a compromise 9 billion 2008 ethanol utilization level becomes law, this would provide some suspenders to the current corn market. But this production level would require the current 3.2 billion U.S. Department of Agriculture corn demand for 2008, and likely keeps ending stocks at a very adequate 1.8 billion bu for this year. A new energy bill probably provides more support to deferred prices, with its possible 11 billion gallon 2008 level. Florida is indicating it will likely relax its state gasoline regulations, resulting in ethanol blending in this third highest gasoline market by the first quarter of 2008. This should be supportive to spot ethanol prices. But Brazil will likely be a competitor for this blending business because of rail logistical issues from the U.S. Midwest, and due to the gasoline distribution center being near the coast.

In this atmosphere, corn prices probably will be in a trading range of $3.60 to $4.10, basis March, until U.S. plantings are better understood next spring, so producers should utilize the topside side of range to have 75% of 2007/08 marketing completed and up to 35% of 2008/09 crop priced in $4.30 area.