Omaha ethanol maker Green Plains’ stock falls sharply after report says it’s closing plants

Source: By Brad Davis, Omaha World Herald • Posted: Wednesday, December 19, 2018

The stock of Omaha-based Green Plains dropped sharply Tuesday after reports that the ethanol producer would shutter two plants and slow production at a third.

The closures hint at slackened demand in the wake of the broad U.S. trade dispute with China, in which China has slapped increasing tariffs on U.S. ethanol and other items in retaliation for the United States’ own tariffs on some Chinese goods.

Ethanol producers in the U.S. had been gearing up to meet Chinese demand, as the Asian nation has been pushing for all of its gasoline to contain 10 percent ethanol by 2020. But with the increased tariffs, such demand has fallen off, leaving U.S. producers with an oversupply.

Nebraska farmers, meanwhile, have lost at least $1 billion in revenue from ongoing trade conflicts in China and elsewhere initiated by the Trump administration, the Nebraska Farm Bureau said in a report earlier this month.

The administration contends that an aggressive stance is needed to level the playing field on trade with China and some other countries.

“We have a lot of catching up to do with China,” President Donald Trump said this fall.

Trade tensions already have made their way into Green Plains’ reports to its investors, with the company indicating last month that it would monitor its production of ethanol depending on market conditions.

“Government actions abroad can significantly impact the demand for U.S. ethanol,” the company said in the report to investors last month, referring to the Chinese tariffs and trade barriers elsewhere for its products.

Reuters reported: “Green Plains idled until further notice its facility in Superior, Iowa, and soon will shut down the plant in Lakota, Iowa, while the company’s plant in Fairmont, Minnesota, was running at half of its capacity.” The news service cited three unnamed industry sources.

The company’s shares closed at $13.05 each on Tuesday. Its stock is down nearly 23 percent so far this year, far outpacing the broader stock market’s losses of nearly 5 percent.