November 5, 2008

Ethanol Producers and Corn Prices Fall

Wavering corn prices have turned on the U.S. ethanol production business, which is struggling to survive in its current form, records show.

One of the country's largest producers, VeraSun, filed for bankruptcy last week, The New York Times reported Wednesday. Industry analyst Ian Horowitz with Soleil Securities expressed concerns over BioFuel Energy, a producer he said was cash poor and, like VeraSun, had done poorly with commodity price hedging, the Times said.

Some companies signed contracts for corn in the summer, when it was priced at around $7 a bushel. Prices have since fallen to around $4 a bushel.

The giant agribusiness Archer Daniels Midland, a large ethanol producer, has seen profits drop in its corn processing division, the report said.

Some feel a wave of bankruptcies could be around the corner although consolidations are possible as soon as credit loosens up, the Times said.

Regarding bankruptcies, "like the airlines, sometimes one goes in, the others run to go in, too," Horowitz said.