Renewable Fuel Industry Under Drought Pressure

8 years 1 month 4 days ago Saturday, August 25 2012 Aug 25, 2012 Saturday, August 25, 2012 12:23:00 PM CDT August 25, 2012 in News
By: Tong Gao

MALTA BEND - The record-breaking drought has continued to impair corn crops, driving the price of corn to more than eight dollars per bushel. Now, ethanol producers are facing challenges to secure enough corn to stay in business.

Mid-Missouri Energy runs an ethanol plant in Malta Bend. General manager Ryland Utlaut said his plant has already reduced 10 percent of its ethanol production because of the high costs.

"We usually run 48,000 bushels of corn a day. Currently, we are down to 35,000 bushels just because margins are not good," Utlaut said.

This year, the yield of corn in Missouri is projected at 75 bushel per acre, sharply down from last year's 114 bushel per acre--another dry year. Kelly Smith, Missouri Farm Bureau marketing and commodities director, said the normal yield of corn in Missouri would be around 140 bushel per acre.

"Eight-dollar corn for ethanol production doesn't work either right now," Smith said. "Many of our ethanol plants are running at negative margins with the ethanol they are making for the fuel market."

"Ethanol prices have moved up some, but quite honestly, ethanol is still very very cheap," Utlaut said. "We rely on the oil industry to distribute our product. So they are the ones to set the price. We are price takers here in ethanol industry. Whatever is offered to us out there, that's what we wind up taking."

However, Utlaut said ethanol prices might continue increase because ethanol producer are supplying less.

Utlaut said the current price of ethanol is still lower than gasoline price. "We are selling $2.60 per gallon. You put taxes on top of that--it's 35 cents, and transportation is 10 cents. That's 45 cents. Maybe it cost $3.05 for the ethanol to be in the marketplace. I don't know what kind of price we got at the gas station now. Maybe $3.60 or $3.70."

The Renewable Fuels Standard, a federal law enacted in 2007, requires about 13.2 billion gallons of renewable fuels, such as ethanol, to be blended with gasoline in 2012.

 

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