Easing corn prices give relief to the ethanol industry

Source: DAVID SHAFFER , Star Tribune Updated: September 28, 2013 - 9:37 PM • Posted: Monday, September 30, 2013

The bottom line improved for many ethanol producers in the last quarter, and industry experts say the outlook is good as a new corn crop is harvested.

Graphic: Less of a corn-ethanol squeeze

Friday September 27, 2013

High corn prices made ethanol unprofitable for more than a year. Plants that made money…

Some ethanol plants are making money again — on ethanol.

For more than a year, high corn prices squeezed the profit out of the biofuel. Producers that made money often did so only through sales of secondary products such as the animal feed called “distillers grains’’ left over from corn fermentation.

But Minnesota-affiliated ethanol ­companies and the industry tracking service Biofuels Benchmarking say many plants’ fortunes shifted in the second quarter, bringing positive margins back to the core business of making fuel

“We are forecasting a good, solid year, as good as Blue Flint’s ever had,” said Greg Ridderbusch, president of the Maple Grove-based holding company for Blue Flint Ethanol in Underwood, N.D.

For the quarter ended in June or July, five of seven Minnesota-affiliated ­ethanol producers that release financial statements reported profits. Among those with improved results were Blue Flint and Heron Lake BioEnergy, based in Heron Lake, which reported net losses in the first quarter.

Most of the ethanol producers tracked by the Star Tribune reported getting higher prices per gallon for ethanol during the quarter — up to 13 percent more than the same period in 2012. Ethanol sales ­volumes also were up, due partly to the closing of some U.S. plants, producers said.

In a separate, private survey of 45 U.S. ethanol makers, Christianson & Associates of Willmar, Minn., reported that almost all plants broke even or made money in the last quarter. That’s a big shift from recent quarters when only highly efficient plants made money.

“In the next two quarters, I think things will remain fairly consistent and even rise as far as earnings are concerned,” said Paula Emberland, who manages Biofuels Benchmarking.

Even less-efficient plants had positive margins on average in the quarter, she said. The benchmarking service does not publicly release individual plant data, only consolidated results.

Ridderbush, who also is a vice president for Blue Flint Ethanol’s ­parent, utility cooperative Great River Energy, said ethanol plants are in ­better shape in regions like Minnesota and North Dakota where crops largely survived the 2012 drought.

“It is kind of nice that our farming economies in both states did make it through the drought,” he said.

Recent price trends

In recent weeks, the price of ­ethanol and corn has dropped, said Larry Johnson, an ethanol industry consultant based in Cologne, Minn. Corn is the biggest cost in making ethanol.

“The buyers are smart enough to know what they have to pay for ethanol, so they bid enough just to keep the ethanol plants with a workable profit,” Johnson said.

But the 2013 corn crop forecast is good, which should lead to lower prices, Johnson said. “I think the winter and spring look good for ethanol margins,” he said.

One uncertainty, said Emberland, is how many idle ethanol plants will ramp up production as more corn becomes available, sending more ethanol into the market.

The industry’s long-term solution is to sell motorists 15 percent ethanol blends, up from the usual 10 percent. But filling stations have been slow to add E-15 pumps and the oil industry has fought the shift.

In a small sign that E-15 is gaining acceptance, Petro Serve USA last week announced it would begin selling the blend at Petro stations in four North Dakota cities. Ridderbusch said Blue Flint supplies Petro with ethanol.

Two Minnesota plants idle

Two Minnesota ethanol plants are among the 20 U.S. ethanol refineries that remain closed.

In Fairmont, one of the state’s largest ethanol refineries has been shuttered for a year. Denver-based owner, Biofuel Energy Corp., has been looking for a buyer but hasn’t gotten an acceptable offer, the company said in is quarterly financial report.

The company, which owns a still-operating ethanol plant in Nebraska, said it has defaulted on loan agreements and has limited liquidity, raising “substantial doubt” that it can keep going. It lost $4.7 million during the three months ending in June — the sixth consecutive unprofitable quarter, but the smallest loss so far.

Another plant, in Buffalo Lake, Minn., recently was sold in U.S. Bankruptcy Court to its main investor, West Ventures, a unit of a New York hedge fund. The plant has been plagued by problems, including two fires and wastewater regulatory issues.

“We are hard at work to get things going again, but there are a lot of issues we will need to overcome,” Jed Latkin, a West Ventures executive who is overseeing the restart, said in an e-mail