U. S. ethanol profits slip on softer fuel prices

Profit margins for U. S. ethanol distillers slipped to evermore dismal levels this week as the price of the alternative motor fuel fell about 10 cents a gallon.

Average U. S. distillers were making about 10 cents per gallon for the week ending Nov. 13, about 10 cents lower than the previous week (all figures US$).

Ethanol prices fell on weak motor fuel demand and as gasoline was even cheaper than the renewable fuel. In the Midwest spot ethanol was $1.67 a gallon, down about 10 cents.

Gasoline prices falling even faster than ethanol prices could keep demand thin.

“Ethanol blenders are moving to the sidelines as the ethanol market has changed from a significant discount to the gasoline prices, to a significant premium,” Rick Kment, an analyst at DTN in St. Louis said in a report.

Spot gasoline in the U. S. Gulf of Mexico cost about $1.21 a gallon. With the blender’s credit of about 51 cents a gallon, refiners could still squeeze out a few cents a gallon by using ethanol.

Aventine Renewable Energy Holdings Inc. said Nov. 14 poor economics for making ethanol was leading to further delays of plant openings. It temporarily suspended construction at its 113-million-gallons-per-year Aurora West plant in Nebraska and delayed the opening of its Mount Vernon, Indiana plant to the fourth quarter of next year.

Late last month VeraSun Energy Corp., the largest publicly traded ethanol producer, went bankrupt.

The company had put itself up for sale after it signed costly contracts for corn.

Despite the troubles, U. S. capacity to make ethanol keeps growing, which is part of the problem. U. S. ethanol capacity has jumped 60 per cent since last year to nearly 11.2 billion gallons per year, which could keep a lid on margins until transportation bottlenecks are eased.

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