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US ethanol shippers face challenges finding truckers to haul product

Houston — US ethanol producers and marketers have found headwinds in recent weeks as truckers to haul product into major hubs have moved on to higher-paying routes.

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"We're just having a hard time finding enough guys to haul ethanol from plants," said one source. "We're struggling in Illinois, Michigan, Indiana and hearing others as well."

The problem has not been helped by production rates climbing in recent weeks. Output averaged 1.072 million b/d in the week ended August 10, down from 1.1 million b/d, the second-highest level on record, the previous week, according to US Energy Information Administration data.

Part of the issue has been the pull of shipping WTI crude to Cushing, Oklahoma, which currently pays higher than most other commodities.

"The economy is better so there's a lot of stuff moving around and we're way at the end of the commodity chain," said one ethanol broker.

The shortage of drivers has prompted some to raise shipping rates, which can drive up costs and either raise sales prices or force plants to sell at lower FOB prices.

US ethanol prices have tumbled to six-month lows in recent days. S&P Global Platts assessed the benchmark Argo market at $1.3680/gal Thursday, down from $1.44525/gal on August 3.

The broker said plants are also lowering FOB prices to compensate for the higher trucking rates.

Some of the effects of the trucker shortage have already been priced in, but if the issue continues, prices could be in flux as plants have to sell at lower rates while paying truckers more.

"I was talking to guys in the wheat and flour milling industry who were saying, 'tell us what rate you need and we'll build those rates in.' $4/ton more, whatever, they just need to know the truckers are there," the broker added.

The lack of workers to move product has caused headaches across the industry as traders find it more difficult to get ethanol from plant to market. And plants willing to pay more to keep drivers on the roads are also having problems.

"It's like negotiating with the abyss," said the broker. "There are just not enough drivers." --Joshua Pedrick, joshua.pedrick@spglobal.com

--Edited by Kevin Saville, newsdesk@spglobal.com