Survival Of The Fittest
For an ethanol plant owner, the first rule of surviving high corn prices is that more capacity tends to be better.
“The old joke about size does matter is certainly the case here,” said Dan O’Neill, senior vice president at Northland Securities, a Minneapolis bank that finances new mid-sized and large ethanol plants.
After size, “plants that are more efficient, those that have long-term contracts for feedstocks…are not as exposed to commodity risk,” he added.
So far, reports of ethanol plants shutting down are few and far between. Alchem Limited stopped production at its 10 million-gallon-a-year facility in North Dakota late last year, citing corn prices. More common are announcements of delays in the construction of new plants – even large, high-tech facilities with strong financial backing that could be expected to push through tough times.
Agricultural giant Cargill Inc., for example, in February indefinitely postponed plans for a 100 million-gallon-a-year ethanol plant in Topeka, Kan.
