June 23, 2008

US ethanol makers report losses on corn price hikes

US ethanol distillers incurred losses during the week ending June 19 as adverse weather in the Corn Belt propelled corn prices to unprecedented highs.

Pavel Molchanov, an analyst at Raymond James and Associates in Houston, said ethanol producers on average were losing a few cents for every gallon of ethanol, something which never happened before.

Prolonged record corn prices would likely keep some producers from operating at full capacity, Molchanov said.

Around 400 million gallons per year of total US ethanol capacity have been shut directly by the floods.

Analysts add that shutdowns resulting from high corn prices could soon far surpass that number.

Newer, more efficient producers, specifically those that can sell dried distillers' grain, were estimated to make a few cents profit per gallon.

Yet older, less efficient distillers were not doing as well, observers said.

July corn futures in CBOT closed near US$7.28 a bushel on Thursday (June 19, 2008).

Meanwhile, spot ethanol prices in the Midwest have risen about 40 cents since the floods to about US$2.90 a gallon.