When it comes to margin and risk management, ethanol producers have difficult and unique choices.

In most commodity processing industries, the output price is highly correlated to input price. For instance, in the energy sector there is a strong price relationship in the crack—the spread between crude oil and gasoline or diesel; in the metals sector there is a strong price relationship in the conversion—the spread between iron ore and steel; in the food sector there is a strong price relationship in the crush—the spread between soybeans and soymeal or oil.

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How many times have you heard somebody say, “Banks only lend to companies who don’t need the money?” I have heard that comment frequently during my career. Now, with the benefit of hindsight, I realize it was those companies who valued their banking relationships and were always prepared to talk to the bank who received the funding. The first step in building a solid bank relationship is to value what a bank can mean for you. Many executives still view a bank as a vendor, selling money, rather than a partner, providing ideas and solutions to improve their business. If you have chosen your banker wisely they will have the experience, tools and contacts that can be invaluable to a business that doesn’t have an unlimited budget for consulting expertise.

If you still don’t think your banking relationship is critical here are some more reasons executives should maintain a good working relationship with their bank.

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The fear of ongoing fees that don’t yield high returns prevents many companies from capitalizing on the investment they make in their advisors. Think about how much your consultants have learned about your company, industry, stakeholders and business processes. They give the owner and business leaders an unbiased and independent business perspective that can’t be found within any stakeholder group. The challenge company leaders face is how to leverage the asset (consultant) they have developed with high return future work that far exceeds the cost.

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Economic progress is slowly ebbing along, more sideways than upwards. The stock market rally has given us a sense of hope that things are turning around, yet economic growth has been relatively flat for some time even though the unemployment rate is near all-time lows. This article was first drafted in the fall of 2011. It’s amazing that after a decade we find ourselves in a similar economy. You’ll recognize the parallels to our situation today. The remedies outlined at the end of the article are still highly relevant in today’s economic environment.

Muddling through - Mixed signals in the economy make decision making difficult for manufacturers.

It’s clear as mud.

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For many companies, asking for investor dollars can be intimidating: after all, it requires a company to parade itself—exposing some of its most confidential information: its strategy, customers, financials and operating practices — to outsiders. But bringing in a consultant early will help you identify the gaps and weaknesses, as well as hidden strengths, before the investors get the chance. Forewarned helps you get forearmed when it comes to raising capital.

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