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End of federal subsidies hurts ethanol profits

Minnesota ethanol producers are being hit hard by the end of major federal subsidies, reports MPR today.

And it's not just here; across the country "ethanol profit margins have declined sharply, even slipping into negative territory," said the story.

And it notes: "Experts see no quick turnaround in sight."

Minnesota is the nation's fourth top ethanol producer.

Randall Doyal, CEO of the Al-Corn Clean Fuel ethanol plant in southeast Minnesota, said the there's no profit margin now.

"Since the first of the year it's been even-to-slightly negative," Doyal said.

The 45-cent per gallon subsidy ended Dec. 31, and the situation was complicated further by a rush from the gasoline companies to buy ethanol before the end of the subsidy. That led to overproduction which now has created an oversupply and depressed prices.

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Comments (7)

If the government has to subsidize it

it's not a viable business or industry unless its only business is with the government.

A.I.G.

Tell that to (the highly profitable) A.I.G.

Never count on subsidies

to make a profit. Ethanol subsidies have been provided to the industry long enough for the industry to have found more efficient means of making ethanol. If a profitable means for making ethanol has not been identified, that is the problem of the ethanol producers. IS there a more profitable means out there? Probably, but it would have been a wiser investment to identify that means while the subsidy was still available than to simply make as much profit on the taxpayers' backs in the short term. Of course, competing with feed producers and food producers for your raw materials isn't the best way to start making a profit, anyway.

What the MPR article also said

"...no Minnesota plant has announced a cut (in production)..."

"...many people in the ethanol business are optimistic the industry will recover quickly."

"We're seeing some export demand pick back up..."

Many people have predicted the death of ethanol as a transportation fuel in the past decade, so far all have been proven wrong. Minnesotans bought nearly 20 million gallons of E85 last year, the 3rd largest amount ever. So let's check back about a year from now and see how things are going.

Corn ethanol

was never more than a taxpayer subsidized giveaway to corporate corn growers.
The rest of us pay for it through increased food prices (the cost of animal feed also goes up, as does that of competing crops such as wheat).
It was sold on the assumption that it would eventually become profitable.
A really viable ethanol industry would be based on otherwise useless plant material and byproducts (Brasil is doing this).

Stunning good news and a good

Stunning good news and a good reason for sunset clauses. I guess the brightest star in the congressional firmament is that sometimes the best thing they can do is nothing. When nothing is the second best thing they can do, they do the second best thing.

Ethanol

uses too much water in production
uses too much fuel in growing corn
increases food costs
depletes aquifers
creates fuel problems in small engines
gives autos less miles per gallon
takes wetlands/ habitat out of reserves
adds to river and stream run-off
demonstrates power of Bluedog congressmen to take care of their friends
oh...and created jobs(short term and low pay)