Bismarck Tribune - Bismarck News - High corn squeezes ethanol support fund dry

High corn squeezes ethanol support fund dry

Dec 11, 2008 - 04:06:05 CST

By LAUREN DONOVAN
Bismarck Tribune

A state fund that helps ethanol producers when they're squeezed by high corn prices will run out of money this month.

Checks written next week to Red Trail Energy, Blue Flint Ethanol and VeraSun Hankinson will empty that account, and it will probably be another six months before the fund has enough money for more payments.

The three qualify for the quarter of July through September. The price of corn went through the roof at nearly $6 a bushel and, along with a flat price for ethanol at $2 a gallon, created "a perfect storm to create the need to access that fund," said Randy Schneider, president of the North Dakota Ethanol Producers Association.

Any producer can only get $1.6 million a year.

The differential between corn and ethanol was so severe that VeraSun is eligible for an entire year's payment from that quarter alone, and the two others nearly are.

Shane Goettle, director of the Commerce Department that oversees the fund, said there isn't enough in the fund to give the three the full amount for which they're eligible. Instead, he'll apportion the remaining $2.4 million based on their production.

Goettle said the Legislature created the fund in 2005 by diverting farm vehicle registration revenue and a trickle of ag fuel refunds to help start-up plants in a volatile industry. Plants have a lifetime limit of $10 million.

"It's enough to keep the plant open, but not enough for profit. It goes into effect when they're getting squeezed between the price of corn and the price of ethanol," Goettle said.

When it's gone, it's gone, and future payments will await revenue deposits, he said.

The biggest check of about $950,000 will go to VeraSun because it had the most production in July through September. The Red River Valley plant, among the largest in the country, has only been on line since June and was acquired by Verasun in a merger with U.S. BioEnergy LLC before filing for Chapter 11 debt restructuring on Oct. 31

Blue Flint and Red Trail reached their cap payment of $1.6 million last fiscal year when they were the only plants getting payments.

Now, starting with a new fiscal year and with VeraSun's eligibility added to the equation, they'll get between $700,000 and $800,000 for the quarter.

Schneider said none of the plants want the payments, though they are critical to their operations.

Corn prices for December are less than $3 a bushel, and Schneider said he's hopeful the future will be better

"It gives me no pleasure to ever use that fund for any plant in North Dakota," he said. He said the plan is to tell the Legislature, "Thanks, we hope it stays," but not ask for it to be expanded.

He said a better solution is a higher gasoline blend of 15 percent ethanol and more support for renewable fuels.

(Reach reporter Lauren Donovan at 888-303-5511 or lauren@westriv.com.)

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Comments

Rumor Mill wrote on Dec 12, 2008 3:56 AM:

" I think the rumors should stop now. There is also word on the street that Santa Claus does not exist. As I have small children I sent an email to Santa Claus asking if it is true. They have not responded. My Children's hopes should not be shattered by fake man and a failed marketing scam. The Tribune should investigate Santa Claus's current status. "

Jason wrote on Dec 11, 2008 6:30 PM:

" It's nice to see that everyone is back on the gasoline bandwagon. Let these prices sit for a year get the gas companies off the publics mind and then start increasing gas again until people whine when there is 3 dollar gas. Ethanol is a legitimate fuel source and I am happy Obama will push to keep these energy saving initiatives into place. You guys can whine all you want ethanol is not going away and as long as we are taking barrels of oil out of the nations energy addiction to oil it is a good thing. And to Delbert the byproducts we make with ethanol feed cattle with an energy rich feed. "

Mike wrote on Dec 11, 2008 12:34 PM:

" I think the ethanol subsidies should stop now. The word on the street is that Red Trail Energy is shutting down. As I have corn to market I sent an email to Red Trail asking if it is true. They have not responded. Tax dollars should not be paid to a failing company and a failed idea. The Tribune should investigate Red Trail's current status. "

No More Subsidies for Ethanol wrote on Dec 11, 2008 11:54 AM:

" I will not purchase any ethanol blended gas as a protest to these ridiculous tax payer subsidies. "

Delbert Moore wrote on Dec 11, 2008 8:31 AM:

" Ethanol producers are direct competitors for corn with the livestock industry which uses more than one half of total American corn production. Because of extreme feed costs in the first half of 2008 coupled with a cattle price collapse in the last two months; cattle feeders have lost a record amount of money in 2008. This has so reduced their equity positon that feeder cattle prices have recently collapsed. Until 2007 cattle and calves were second to wheat in gross receipts from agriculture in ND. There are 10,000 producers of cattle in ND. The taxes these producers pay is going to subsidize their competition. Cow/calf producers in ND who sell calves in the fall will lose about $100/calf in 2008. Subsidizing one industry at the expense of another, which has been here much longer, is morally wrong. "

LJ wrote on Dec 11, 2008 8:30 AM:

" Mr. Schneider will you explain to me and the rest of the consumers and taxpayers why we should be buying your product based on the following facts? Gas is now $1.699 per gallon in Bismarck. The average vehicle will see a 15% to 27% fuel mileage decrease when using 10% ethanol compared to regular gasoline. Using this average, ethanol blended gasoline would have to sell for no more than $1.444 and as low as $1.24 or less per gallon for 10% ethanol blended gasoline to be a good deal for the consumer. My GMC truck fuel mileage drops 15 percent in town and 27 percent on the interstate when burning the 10% ethanol blended gasoline. Its time to admit that ethanol manufacturing is not a viable business and quit pumping taxpayer dollars into a failed experiment. "

good wrote on Dec 11, 2008 7:36 AM:

" Now maybe we can stop the madness and come up with a real solution. "

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