U. S. ethanol producer and grain processor Archer Daniels Midland Co. said Feb. 3 nearly 21 per cent of U. S. ethanol production capacity has been shut due to weak demand and poor margins.
U. S. ethanol plants with a production capacity of 10.2 billion gallons per year are currently operating, down from a peak of 12.9 billion sometime mid-to late last year, ADM executive vice-president John Rice said on a conference call with analysts.
U. S. capacity to make the alternative fuel rocketed last year as companies raced to build plants amid generous government incentives.
Even with the tough times, a few plants are still opening as producers hope that U. S. mandates for traditional ethanol, which are set to increase every year until reaching a peak of 15 billion gallons per year in 2015, will help fuel demand to recover.
ADM’s numbers on national idled plant capacity were more aggressive than those from the Renewable Fuels Association, an industry group. After ADM released its numbers, the RFA revised its operating ethanol plant capacity downward to just under 10.3 billion gallons annually, from 10.37 billion gallons.
After filing for bankruptcy protection in October, VeraSun Energy Corp. has shut 12 out of 16 ethanol plants. The company, which used to be the second-largest U. S. producer of the fuel, suffered from costly hedging bets on the price of corn and the credit crunch.
Since then a string of plants have filed for bankruptcy protection, including a subsidiary of Panda Ethanol Inc., Northeast Biofuels and, last week, the private Wisconsin distiller Renew Energy LLC.
If U. S. capacity to make the fuel falls short, it could mean the country will import more ethanol from Brazil. If ethanol supply gets too tight, the U. S. Environmental Protection Agency has the power to waive federal mandates.