Lower Corn Prices Should Translate Into Sustainable Operations

By Bryan Sims | November 03, 2008
Current ethanol producers have seen how the rise and fall of corn prices, especially brought on by late spring flooding in the Midwest, can affect their operations and ultimately their bottom lines. In July, corn prices skyrocketed to all-time highs, hovering at or above $8 per bushel. Unfortunately, some ethanol producers are still locked in at those high prices. Following this brief spike, corn prices then hit some of the lowest levels of the year, selling at or under $4 per bushel on the Chicago Board of Trade, down nearly 50 percent from midsummer.

On a positive note, this drastic downswing in corn prices may be a benefit for plants now coming on line, equaling healthy profit margins during the first few months of operation. Plus, these ethanol plants can hedge against futures contracts heading into winter. At press time, corn futures for December rose 15.5 cents, or 3.8 percent, to $4.18 per bushel, according to CBOT.

In this issue's list, three plants completed construction: Bridgeport Ethanol LLC, a 50 MMgy plant in Bridgeport, Neb.; Southwest Georgia Ethanol LLC, a 100 MMgy facility in Camilla, Ga.; and Poet Biorefining-Marion, a 68 MMgy plant in Marion, Ohio.

Southwest Georgia Ethanol, the southeasternmost U.S. operating plant, began grinding its first batch of corn Oct. 10. It began receiving corn Sept. 12, followed by a 90-car unit train that brought more than 300,000 bushels of corn on-site Sept. 21. "Our board, management team and employees have put in a tremendous amount of hours assembling all the pieces of this jigsaw puzzle," said Murray Campbell, chief executive officer of First United Ethanol LLC, which owns the plant. "Projects this size don't happen overnight. It takes a commitment from stockholders and supporters to see them through."

Range Fuels Inc. and Appomattox Bio Energy are two of the newest additions to this list, and both will use a feedstock other than corn. Range Fuels is constructing a cellulosic ethanol plant near Soperton, Ga., where it will employ a proprietary thermochemical process technology to break down woody biomass. The plant will initially produce 10 MMgy but plans to build out to a maximum nameplate capacity of 100 MMgy after its scheduled start-up date in late 2009. Appomattox Bio Energy, an operating subsidiary of Osage Bio Energy, is building a 65 MMgy ethanol plant in Hopewell, Va., that will use barley as its feedstock. The project broke ground Oct. 3, and contractors have arrived on-site, according to Chief Operating Officer Joel Stone.