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
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 ...