Yields shrink due to drought

And while Gevo plans to switch to producing ethanol from bio-isobutanol (check my post before this one), Colorado-based BioFuel Energy, meanwhile, has decided to idle its Fairmont, Minnesota, ethanol facility until further notice because of high corn prices and ethanol oversupply.

The company said the Fairmont plant will remain idle until it will be able to secure local corn at price levels that will support better margins.

BioFuel Energy’s second plant in Wood River, Nebraska, continues to operate. Each facility has the capacity to produce 110m gallons/year of corn-based ethanol.

Corn prices soared in record highs in August because of the drought although corn futures slide down this week because of expectations of a better-than-expected corn yields this year after the drought. High corn prices this summer led to several ethanol price hikes from producers such as Archer Daniels Midland (ADM), Grain Processing Corp., and MGP Ingredients.

Companies that announced ethanol plant idling this year include, among others, Valero Energy, Pinal Energy LLC, NEDAK Ethanol LLC, Central Minnesota Ethanol Co-op, and Abengoa.

The Renewable Fuels Association (RFA) reported that 26 ethanol plants representing 1.5 billion gallons of capacity have already been idled, some recently and others have been idle for several years.

The RFA said ethanol capacity rates in recent weeks have been running at 12% below the industry run rate in early June and 15% below the capacity rate at the beginning of this year.

Because of soaring corn prices (and in turn corn products prices), demand and consumption for ethanol have come down leading to the plants’ idling.