Drought burns ethanol makers

HAPPY MONDAY READERS........We all need to keep an eye on weather due to possible threat from Issac.  I really don't understand why so many Parishes in South Louisiana are panicking so fast and issuing mandatory evacuations and closing all schools?  The weather service admits the projections will NOT be very clear until at the earliest mid day Monday.  As of Sunday night , there is not even a clearly defined eye.  And, it has not even yet made Hurricane level 1...........

Here's an article which shows how the ethanol manufacturing plants are suffering during this extreme drought which is taking a heavy toll on the corn crop.

"Pete"
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Drought burns ethanol makers
BY FRANCINE KNOWLES Business Reporter/fknowles@suntimes.com  August 24, 2012

Decatur-based Archer Daniels Midland and other ethanol producers in the state are taking hits due to the continuing drought, and storm clouds remain on the horizon for the businesses in the near-term, industry experts say.
Topeka Capital Markets analyst Ian Horowitz, who recently downgraded ADM’s stock from “buy” to “hold,” expects ADM to report ethanol-related losses in its next two fiscal quarters.
The agriculture business giant, the largest U.S. producer of ethanol and the world’s biggest corn processor, last month said weaker ethanol results hurt its fiscal fourth quarter profit, which sank 25 percent to $284 million from a year earlier.
Its bioproducts business, which includes its ethanol results, reported a $61 million operating loss, compared to a $111 million profit a year earlier. For the year, the business lost $74 million, a plunge from the $749 million it earned last year, when it benefitted from high ethanol prices.

The drought, combined with the over capacity the industry was already grappling with, also has reduced profits at Big River Resources, said Raymond Defenbaugh, president of the company. Big River Resources owns four plants —including one in Downstate Galva — and has investments in another.
The worst U.S. drought in decades has led to a runup in corn prices, the main feedstock for ethanol producers.

Operating at a loss
“We’ve seen negative operating margins for most ethanol producers ... all due to the higher pricing,” Horowitz said.
There’s more pain to come, predicted Darrel Good, a professor of agricultural and consumer economics at the University of Illinois.
There “will clearly be reduced profitability” in the months ahead for the industry, he said.
It’s an industry that has seen explosive growth. U.S. ethanol production has grown from producing 1.8 billion gallons of ethanol in 2001 to 13.9 billion last year, according to the Renewable Fuels Association. The number of plants more than quadrupled from 50 in 1999 to 209 this year, the group said.
ADM wouldn’t comment on whether it has reduced its ethanol production because of the drought.
Defenbaugh, who also is president of Illinois Renewable Fuels Association, said a “number of plants” in the state have cut back about 15 percent on production.
Production at Big River Resources’ plants has been cut back about that amount, he said.

Illinois not idling
But producers in the state haven’t had to idle plants here, unlike elsewhere in the U.S., industry experts say.
“Right now I’m unaware of any Illinois companies idling production due to the drought,” said Matt Hartwig, spokesman for the national Renewable Fuels Association, which lists 14 ethanol plants in Illinois on its website.
They “really have not been squeezed enough” to temporarily shut down, Good said. “We know that’s not true nationwide.”
Indeed, due to the drought, Texas-based Valero Energy Corp. idled two of its ethanol plants, one in Indiana and one in Nebraska; and a separate Nebraska plant also has been temporarily idled, according to the association.
Across the country, “Many plants are running at less than full capacity due to market conditions,” Hartwig said.
The U.S. Energy Information Administration said earlier this month ethanol production fell 12 percent from 920,000 barrels per day for the week ending June 8, to 809,000 for the week ending July 27.