E85 Boondoggle of the Day: Ethanol Suppliers Go Belly-Up
While we wait for automaker bankruptcy filings, we have a little schadenfreude from a different (but equally deserving) sector to keep you going. Reuters reports that spiraling foodstock costs are tearing a giant hole in profit margins for domestic ethanol suppliers, causing a spate of bankruptcy filings. Corn (the main ingredient for domestically-produced ethanol) was already hitting record prices before the recent deluge in the Midwest. Post-flooding price spikes have wrought havoc on the whole ethanol business plan. Alex Moglia of Moglia Advisors, a biofuel consultancy group, tells Reuters that 12 biodiesel and ethanol plants have declared bankruptcy in recent months, with more to follow. The plants that are still open are typically producing at about half capacity, says Moglia. Ironically, a major problem for domestic ethanol producers is the transportation of their fuel. The majority of ethanol refineries are in the Midwest, which has a massive oversupply of corn juice. High fuel costs are preventing America's alternative fuel from reaching larger markets on either coast at competitive prices. Ultimately, the big boys of ethanol– your ADMs, and VersaSuns– will survive the hard times for ethanol producers, thanks to agribusiness diversification. It's the little guys that are being forced out of business, as reality begins to hit home for America's "magic fuel." Even so, their elected officials are probably lobbying for bailouts as we speak.