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Tough Times For US Ethanol To Force Shake-Out

Source:  Copyright 2008, Reuters
Date:  March 3, 2008
Byline:  Story By Timothy Gardner
Original URL: Status ONLINE


US ethanol producers likely face an industry shake-out as record corn prices driven by the alternative fuel boom are set to last into the foreseeable future, squeezing profits for small distillers.

Washington has offered producers hundreds of millions of dollars in incentives in an attempt to reduce foreign oil imports while supporting the agriculture business.

But that has had the unintended consequence of helping to boost corn prices to a record of more than $5.40 a bushel. New distilleries are gobbling the grain as US ethanol production capacity has nearly doubled in 13 months to more than 8 billion gallons per year.

High corn prices are unlikely to fade as new plants keep opening. Energy analysts at Friedman, Billings, Ramsey & Co, Inc, for instance, recently raised their 2008 to 2010 corn price forecast from $3.75 to $5.00 bushel.

"A lot of smaller companies may not be able to stay ...

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