Friday, November 30, 2007

Ethanol shakeout has begun


[Subheading] Ethanol producers to merge as the industry deals with too much supply, scrapped projects and slumping stock prices.
The shakeout in America's ethanol industry has begun, and corn-rich Minnesota was at the epicenter Thursday.

With ethanol prices faltering because of burgeoning supplies and its stock trading at about half the level of a year ago, Inver Grove Heights-based US BioEnergy Corp., the nation's fourth-largest ethanol distiller, agreed to be acquired by VeraSun Energy Corp. of Brookings, S.D., the country's third largest producer.
The deal comes as profit margins for ethanol have shriveled over the past year, and some plans for ethanol plants have been taken off the table.

Since 2000, total U.S. ethanol production has more than quadrupled to 7.2 billion gallons from 1.6 billion gallons. An additional 6.2 billion gallons of capacity is expected from plants under construction or expansion, according to the Renewable Fuels Association.

In Minnesota alone, 17 ethanol plants already produce 680 million gallons of the fuel, but four massive plants scheduled to go live next year will add another 400 million gallons of production capacity.

"The number of plants under construction is truly frightening," said Ralph Groschen, a senior marketing specialist with the Minnesota Department of Agriculture who closely watches the state's ethanol development. The country could go from 7 billion gallons of capacity now to 12 billion gallons, or about roughly 10 percent of U.S. gasoline capacity, in a few years, according to Groschen.

No comments: