Minnesota Ethanol Producers Running on Empty

                                   HAPPY THURSDAY READERS!  

The predominate news I'm picking up on an almost daily basis these days is about how the ethanol industry has fallen on hard times.  Most are not even breaking even and many have shutdown or running their plants a much lower than full production rates.  Minnesota appears to have been hit especially hard.  That State has 21 ethanol plants in the State.  As you see from this article, they are trying any way possible to supplement their revenue by any and all means possible.  No doubt the severe drought has had a significant impart on the ethanol business because of the loss of a large percentage of the corn crop, driving up the price of corn, their basis feed stock.

I'd personally like to see the EPA ethanol mandate disappear and let the free marketplace determine who wants ethanol gas and who doesn't.  That would determine the production requirements for ethanol production.  BUT, this is a "VERY HOT POTATO" issue amongst politicians, ESPECIALLY in an election year.

"Pete"
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Minnesota Ethanol Producers Running on Empty 

September 25, 2012
High corn prices and lagging prices for ethanol lead to the second consecutive losing quarter for Minnesota’s ethanol producers.       
      
MINNEAPOLIS, MN – Minnesota’s ethanol producers recorded their second losing quarter in a row, the Star Tribune reports. Their losses come amidst high corn prices and lagging prices for ethanol.  "The conditions are tough at best," said Brian Kletscher, CEO of Highwater Ethanol, whose plant in Lamberton, Minn., posted a net loss of $1 million last quarter.

According to Christianson & Associates, a firm that tracks ethanol producers, the production of ethanol is no longer a break-even proposition. "The big story is that the cost of the corn is higher on a per-gallon basis than what we can sell the ethanol for," said John Christianson, principal at Christianson & Associates. "That dynamic happened in the first two quarters of 2012."

To improve their fortunes, ethanol producers have been relying more on the sales of an animal feed byproduct, called distillers’ grains, and industrial corn oil. Some plants also sell carbon dioxide captured from fermentation.  Sales of these byproducts accounted for 23% of ethanol plant revenues in 2012, up from 16% in 2008, Christianson said.

One of Minnesota’s hardest hit plants is BioFuel Energy Corp. in Fairmont that reported nearly $11 million in losses on revenues of $123 million.

Small producers have also been hit hard, with Granit Falls Energy losing $566,000 in the second quarter, which followed a profitable first-quarter, the only company to report a profit in the Star Tribune’s first-quarter survey. Two other single-plant companies also reported losses.
Ethanol prices have dropped up to 16% compared with the year-earlier quarter, with part of the decline the result of fuel blenders who went on a buying binge at the end of last year in order to collect expiring federal tax credits. That created an oversupply in the market that had lasting effects into the second quarter.

Larry Johnson, an ethanol industry consultant, said corn prices recently dipped below $8, which bodes well for the industry. To save money on corn, many ethanol producers are purchasing directly from farmers and adding storage facilities to hold it.
Minnesota has 21 ethanol plants, including one that is closed.