Wednesday, June 18, 2008

Ethanol Producers Changing Their Plans

We are probably within 6 months of corn prices peaking. As I have said we are right at if not passed the price of corn where ethanol producers start losing money. This will take awhile to play out and there is enough worry (correctly so) about this years crop but corn has its limit and that is where demand for ethanol dries up.

Delaying the opening of nearly completed ethanol plants is unprecedented, analysts at Credit Suisse said Wednesday. They expect more plant closings as the industry struggles with lower profit into next year. That could eventually mean higher energy prices for consumers, though it also could help sustain ethanol producers that make it through 2008.


"We expect further plant delays and curtailments due to a very challenging margin outlook," the Credit Suisse analysts led by Mark Flannery said. The analysts lowered their year-end capacity forecast to 9.5 billion gallons from 10 billion.

All of this I think also sets some sort of floor on corn prices in the near term. Don't expect $2 or even $3 corn in the next few years.

VeraSun delayed the opening of ethanol plants in Welcome, Minn., and Hartley, Iowa, because of the unfavorable spread between corn and ethanol prices, spokesman Mike Lockrem said. He said the company remains optimistic that it will be able to open the plants if market conditions for ethanol production improve.

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