August 5, 2008


Slide in corn prices revives US ethanol industry


With corn prices coming down from their recent highs, ethanol companies are once again finding operations profitable.


The high corn prices of recent months has made it difficult for ethanol producers to make even tiny profits, with most of them sustaining losses. 


According to the Chicago Tribune, VeraSun Energy Corp. announced recently it will open its ethanol plant in Hankinson, N.D. The plant was built in 2006, but its opening had been on hold because of volatility in the market, VeraSun officials said.


However, there are others who would rather wait-and-see: Glacial Lakes Energy's plans to build an ethanol plant at Meckling in Clay County remain on hold. Work was previously halted due to high corn prices.


The credit crunch from the US economic slowdown has also affected operational plans for ethanol companies.


Although corn prices have eased, the ethanol industry might not experience much price relief for a month or so due as advanced buying through corn futures meant that ethanol plants are currently using the more pricey corn, the paper reported.


As speculative money exits the corn market, prices are showing signs of cooling.


Despite the volatility in the markets, corn supply have remained stable throughout, especially as good weather promised a bumper harvest, the paper said. 


However, the slide in corn prices would affect corn farmers, who invested in expensive fertilizers and seeds to cash in on the boom in prices earlier.


Verasun, one of the largest ethanol producers, having emerged wiser from the price boom, is now seeking alternatives to corn as a feedstock to avoid market volatility.


Chicago Tribune reported that the company is now looking at cellulose and will start construction next year on a plant near Emmettsburg, Iowa, that will process corn cobs to produce about 25 million gallons of ethanol a year, along with about 100 million gallons annually from corn.


Although making ethanol from cellulose could be accomplished in the lab, the high costs of commercial operation have so far deterred would-be producers.

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