In the ethanol industry, the term ‘corn crush’ refers both to a physical process as well as a value calculation. The physical crush is the process of converting corn into the byproducts of ethanol and distillers’ dried grains (DDGs). The corn crush spread is a dollar value quoted as the difference between the combined sales values of the products (ethanol and DDGs) and the cost of corn. This value is traded in the cash or futures market based on expectations of future price movement of corn versus ethanol and DDGs. The relationship between prices in the cash market is commonly referred to as the Gross Production Margin (GPM). The corn crush value traded in the futures market (also referred to as the corn crush) is an intercommodity spread transaction in which corn futures are bought (or sold) and ethanol and DDGs are sold (or bought). The corn crush spread is often used by ethanol producers to hedge the purchase price of corn and the sales prices of ethanol and DDGs. It also offers many opportunities for speculators, as the spread relationship between the Corn, Ethanol,and DDG futures varies over time.
Organization |
United States Department of Agriculture |
Publisher |
CME Group |
Publication Views |
4258 |
Material Type |
Written Material |