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Ethanol Generation Grinding to a Halt

by 5m Editor
4 March 2008, at 2:11pm

NEW YORK - The ethanol boom is running out of gas as corn prices spike, says Jon Birger. Green Energy can't compete as grain prices continue to soar.

Writing in CNN Moneys' Fortune, he says that Cargill is scrapping plans for a $200 million ethanol plant near Topeka, Kansas. And a judge has approved the bankruptcy sale of an unfinished ethanol plant in Canton, Illinois.. and that was just this week.

It appears that plans for as many as 50 new ethanol plants have been shelved in recent months. Wall Street is pulling back from the sector, says Paul Ho, a Credit Suisse investment banker specialising in alternative energy. Financing for new ethanol plants has been shut down," says Ho.

How can the ethanol industry be slumping only two months after Congress passed an energy bill most experts consider a biofuels boon? The answer is runaway corn prices.

Spurred by an ethanol plant construction binge, corn prices have gone stratospheric, soaring from below $2 a bushel in 2006 to over $5.25 a bushel today. As a result, it's become difficult for ethanol plants to make a healthy profit, even with oil at $100 a barrel.

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5m Editor