|
Another Northeast Iowa ethanol plant fizzles
(Waterloo-Cedar Falls Courier (IA) Via Acquire Media NewsEdge) Dec. 6--STEAMBOAT ROCK -- The sky in northeast Hardin County was clear Friday, and that's not a good sign.
Since 2005, billowy clouds of steam over the Pine Lake Corn Processors ethanol plant near Steamboat Rock meant production was in full gear. The facility shut down Monday, a victim of high-priced corn and less expensive fuel.
It's the second Northeast Iowa plant to halt production recently. Last month, VeraSun Energy Corp. pulled the plug on its Dyersville distillery as the company plows through Chapter 11 bankruptcy proceedings.
"The last drop (of ethanol) ran through at 3 a.m. Monday morning to be precise. We ran out of cash," said Larry Meints, Pine Lake president. "It's almost similar to the VeraSun problem."
Pine Lake and VeraSun differ drastically in size and scope, but the downfall of both was the same. Local investors primarily own Pine Lake, which produces about 30 million gallons of ethanol a year. VeraSun is a publicly traded company pumping out 1.64 billion gallons a year, according to its Web site.
Meints said Pine Lake bought too much high-priced corn this summer and didn't contract enough ethanol at a price to cover expenses.
Losses were also blamed on ill-advised hedging -- taking a position in the futures market that is equal and opposite to the position one expects to have in the cash market.
Corn soared to nearly $8 per bushel in June. At the same time, ethanol was at nearly $3 per gallon.
Now, corn is worth less than $3 per bushel and ethanol hovers around $1.50 per gallon. It led to historically unfavorable margins.
"We were still chewing through $6 corn (recently) and ethanol was around $1.50. Hedging: That did not go well," Meints said. " ... It's very disappointing."
For years, the corn-based fuel was billed as the savior of rural Iowa by the industry. Officials believed it would bring prosperity through jobs and higher corn prices. The plant was featured on the CBS news magazine "60 Minutes" about the topic.
Pine Lake fulfilled that prophecy its first two years of production, netting $24.1 million in profits for investors and employing more than 30 people. Farmers said they reaped the benefits as well.
Now out of money, Meints said the plant's board of directors had no choice but to shutter the facility. Only a handful of employees remain tying up loose ends.
The shutdown, which means the loss of jobs and economic opportunity, didn't go unnoticed.
"Sunday it was still steaming and nothing on Monday," said Lonny Bevig, who owns a agriculture repair shop a mile north of the plant in Cleves.
The closure has been a hot topic at the repair shop this week, Bevig said. Area farmers often stop in daily to chat. The parts department serves as a make-shift coffee shop, with free peanuts on the table.
Though the closure probably won't hurt his business, Bevig said producers are concerned. Marvin Veld, who farms near Steamboat Rock and sells corn to the plant, said corn prices have been at least 15 cents higher per bushel in the area since the plant opened. For 100,000 bushels, that's $15,000.
If the plant remains closed, he said farmers and the local economy will lose.
"The farmers will buy more (when they have money). ... It all trickles down," Veld said.
Meints said undisclosed plans are in the works to get Pine Lake running again by next week. In the mean time, a skeleton crew is keeping the facility in "high idle," he said, until the matter is resolved. It's very expensive to totally shut down the facility, Meints said.
Finding more financing to retain ownership of the plant is the main goal, Meints said. The board will look at purchase offers and chapter 11 bankruptcy as a last resort.
"We definitely plan to reopen but don't know when," Meints said.
The Pine Lake executive said its investors and corn suppliers are in a better position than those associated with VeraSun.
Meints said stockholders made enough money through dividends and tax credits to cover any potential losses. The plant also contracts corn -- about 12 million bushels per year -- exclusively with Prairie Land Cooperative based in Hubbard. The cooperative is responsible for honoring futures contracts with farmers, not Pine Lake.
Prairie Land officials didn't return a call for comment.
VeraSun said it may not honor commitments to farmers and grain elevators that sold it corn for future delivery as stipulated by the bankruptcy. In other words, VeraSun corn suppliers could lose more than $4 per bushel given today's corn prices.
Veld said he's lucky the 20,000 bushels of corn committed for December delivery at $5 to $6 per bushel is supposed to go to Pine Lake instead of VeraSun.
"I feel very fortunate," he said.
Contact Matthew Wilde at (319) 291-1579 or matt.wilde@wcfcourier.com.
To see more of the Waterloo-Cedar Falls Courier, or to subscribe to the newspaper, go to http://www.wcfcourier.com/.
Copyright (c) 2008, Waterloo-Cedar Falls Courier, Iowa
Distributed by McClatchy-Tribune Information Services.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
[ Back To TMCnet.com's Homepage ]
|
INDUSTRIES
Activate Email 
Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO East, January 20-22, 2010. Miami, FL.
