Struggling ethanol makers hope to snap back


By David Shaffer

Star Tribune (Minneapolis)

FAIRMONT, Minn.

High prices for corn have hammered the ethanol industry.

For the first time in 16 years, U.S. ethanol production declined in 2012, in tandem with a drop in gasoline demand thanks partly to more fuel-efficient vehicles. Ethanol makers got caught between the high cost of corn and ethanol prices that sometimes sank too low.

“No matter who you were, you were working hard to get through the year,” said Greg Ridderbusch, president of Blue Flint Ethanol, an Underwood, N.D., ethanol plant owned by Great River Energy, a wholesale power cooperative based in Maple Grove, Minn.

As corn farmers prepare to plant a record-size crop this season, the outlook for the ethanol industry could turn on the next corn harvest — and whether it brings lower prices.

“All they want to do is get to a new crop,” said John Christianson, principal in a Willmar, Minn., accounting firm that tracks ethanol plants.

Already, the ethanol industry is experiencing a modest recovery this spring, as corn prices have remained below $7 per bushel since March. Eight idled production facilities have reopened. Ethanol output has risen, though it remains below the levels of recent years.

“Everyone is optimistic because the price of corn has gone down,” said Larry Johnson, an ethanol industry consultant based in Cologne, Minn.

Omaha, Neb.-based Green Plains Renewable Energy, the nation’s fourth-largest ethanol producer with nine plants reported first-quarter profits of $2.6 million on May 1 and expects earnings to improve in the months ahead.

Yet the Fairmont plant, which once employed 66 people, recently shed all but 16, possibly until the fall. The owner, Biofuel Energy, based in Denver, lost $46 million last year, and has retained the Minneapolis investment bank Piper Jaffray & Co. to consider its options, including a possible sale. Company officials declined to comment.

Ethanol producers got caught last year in a commodities squeeze. They paid a lot for corn and didn’t get enough for ethanol. The industry also lost a cushion when a tax credit to blenders of corn ethanol expired Dec. 31, 2011.

The top 25 percent of ethanol plants that are most efficient continued to make money, though not a lot, said Christianson of the analytics service Biofuels Benchmarking.

To break even, plants increasingly rely on sales of byproducts like distillers’ grains, an animal feed that cattle ranchers purchase instead of corn. Yet as corn prices drop, so can those revenues, said Paula Emberland, an analyst for the benchmarking service.



Reader Comments ...


Next Up in Business

GM to unveil Springfield-built truck in March
GM to unveil Springfield-built truck in March

Chevrolet will unveil a new medium-duty Silverado truck that will be built at Navistar’s Springfield plant at an auto industry show in Indianapolis this spring. The Springfield plant has long been preparing for the joint venture with GM to build medium-duty trucks. Those trucks will be available in both the International and GM brands, and will...
Spectrum reports TV streaming app service issues
Spectrum reports TV streaming app service issues

Spectrum customers are reporting service interruptions while attempting to use the Spectrum TV app, the company said on Friday afternoon. “Spectrum customers are experiencing a service interruption while attempting to use the Spectrum TV App. This is causing errors including incorrect login information. Technicians are working diligently to restore...
Amazon raises monthly Prime membership rate
Amazon raises monthly Prime membership rate

The monthly membership fee for Amazon Prime rose Friday from $10.99 to $12.99. Company officials said the annual membership will remain at $99 dollars. Monthly customers do not get access to Amazon Video, which costs $8.99 a month. The last Prime subscription hike came in 2014, when Amazon increased its yearly membership from $79 to $99. The e-commerce...
Starbucks testing out stores that do not accept cash
Starbucks testing out stores that do not accept cash

Starbucks is testing out a cashless checkout in stores nationwide. As of Tuesday, one downtown Seattle store accepts only cards or mobile payments, according to a report from KIRO-7. The coffee chain is receiving mixed reviews from customers, some who like the convenience while others worry about privacy issues. Robert Safian, editor of Fast Company...
Top tips for selling your old stuff on eBay (and actually making cash)
Top tips for selling your old stuff on eBay (and actually making cash)

Too much clutter, too little money, too many gifts you didn't like... an eBay auction is one of the simplest solutions to all three issues. If your trash might be someone else's treasure, an eBay business is simple to start and accessible to just about anyone. "It has low start-up costs and it can be started out of your home," noted the ...
More Stories