Days of promise fade for North America ethanol production as drought causes widespread crop failure
By John Eligon and Matthew L. Wald
16 March 2013 MACON, Missouri (The New York Times) – Five years ago, rural America was giddy for ethanol. Backed by government subsidies and mandates, hundreds of ethanol plants rose among the golden fields of the Corn Belt, bringing jobs and business to small towns, providing farmers with a new market for their crops and generating billions of dollars in revenue for the producers of this corn-based fuel blend. Those days of promise and prosperity are vanishing. Nearly 10 percent of the nation’s ethanol plants have stopped production over the past year, in part because the drought that has ravaged much of the nation’s crops pushed commodity prices so high that ethanol has become too expensive to produce. A dip in gasoline consumption has compounded the industry’s problem by reducing the demand for ethanol. The situation has left the fate of dozens of ethanol plants hanging in the balance and has unsettled communities that once prospered from this biofuel. Backed by government subsidies and mandates, hundreds of ethanol plants rose among the golden fields of the Corn Belt, bringing jobs and business to small towns, providing farmers with a new market for their crops and generating billions of dollars in revenue for the producers of this corn-based fuel blend. Those days of promise and prosperity are vanishing. Nearly 10 percent of the nation’s ethanol plants have stopped production over the past year, in part because the drought that has ravaged much of the nation’s crops pushed commodity prices so high that ethanol has become too expensive to produce. A dip in gasoline consumption has compounded the industry’s problem by reducing the demand for ethanol. The situation has left the fate of dozens of ethanol plants hanging in the balance and has unsettled communities that once prospered from this biofuel. “It’s a more somber mood,” said Todd Sneller, the administrator of the Nebraska Ethanol Board. “The growth opportunity that existed some years ago is still out there in theory, but the reality that it’s going to take an awful lot of time, money and political battles to realize that opportunity” is causing consternation. Thousands of barrels of ethanol now sit in storage because there is not enough gasoline in the market to blend it with — and blends calling for a higher percentage of ethanol have yet to catch on widely in the marketplace. Advanced biofuels from waste like corn stalks and wood chips have also yet to reach commercial-level production as some had predicted they would by now. Referring to the plants that have been idled, Eric Lee, a commodities expert at Citibank, said: “Is that going to be temporary or permanent? It’s hard to say.” […] Indeed, people here in Macon, in northeastern Missouri, are not as grim about the future of their plant, which is operated and partly owned by POET, an ethanol producer with more than two dozen plants nationwide. The plant has vowed to reopen, and it has retained all 44 of its employees to do maintenance work as it undergoes more than $13 million worth of renovations that it hopes will make it more efficient and able to produce ethanol more cost-effectively. […] The drought was particularly brutal here last year, leaving farmers with little to no corn. Don Mutter, who farms in nearby Cairo, said he produced about 25,000 bushels of corn last year, just 5.5 percent of his usual yield. Without corn nearby to purchase, the plant had to spend extra to haul it in from elsewhere. For several months it was operating at a loss. It ceased operations at the end of January. “We are going to start back up, this year most likely,” said Steve Burnett, who has been the manager since the plant opened in 2000. [more]
