S.D. Ethanol Plants Hanging In There

Strength of ethanol market is helping biorefiners cope with higher corn prices.

Published on: Oct 23, 2012

By Loretta Sorensen

South Dakota's reduced corn yield in combination with high corn prices has not yet significantly impacted the state's ethanol plants.

"Margins are tougher with current corn prices," Poet's Public Relations Manager Matt Merritt says. "Industry wide, ethanol production has dropped about 15% since the beginning of 2012. The industry is feeling the effect of the drought and the strong corn market, but no more than any other user of corn."

"We've been able to use some milo at our Mina plant to help stretch the corn supply there," Roger Hansen, GLE director of grain commodities energy, says. "The strength of the ethanol market is really more about the price of ethanol than the corn shortage and corn prices. Ethanol prices need to keep up with the value of corn and gasoline and then there won't be any problems in competing in the market."

The ethanol plant at Aurora, S.D., processes corn in this file photo. The industry faces what one reinfery CEO calls a "very challenging year."
The ethanol plant at Aurora, S.D., processes corn in this file photo. The industry faces what one reinfery CEO calls a "very challenging year."

Tom Hitchcock, CEO at Redfield Energy LLC, says the $3 increase in corn prices since mid-June 2012, raising corn prices to $8 or more, consumes 85% of his company's cash expenses.

 "Grind margins have been a challenge for the ethanol industry for most of 2012," Hitchcock says. "There's little doubt that this next 12 months will be very challenging for users of corn, including livestock and poultry producers as well as ethanol plants."

Sorensen is a Yankton, S.D., freelancer writer.