North Dakota Ethanol Producers are at Risk as Fund Dries Up
Editor’s Note: Sasha is one of the newest additions to the Gas 2.0 writing team. Welcome Sasha!
North Dakota’s fund for helping ethanol producers hedge against fluctuating corn prices is about to run out, and the producers are getting worried.
The fund, paid for in part by farm vehicle registrations, was drained by high corn prices earlier this year, according to the Bismark Tribune. Ethanol facilities operate on very slim margins, amplifying the effect of market turbulence. The goal of the fund, run by the North Dakota Commerce Department, was to create a safety net — $1.6 million per year to be exact — for existing ethanol production facilities and to draw new facilities in as well. Now the fund only has $2.4 million left.
- » See also: Biofuels Breakthrough: Making Fuel From Air With Engineered Microbes
- » Get Gas 2.0 by RSS or sign up by email.
Commodity Fluctuations
North Dakota has an annual capacity of 333 million gallons of ethanol. Due to this year’s excessive commodity fluctuations, VeraSun, the state’s largest producer (which recently filed for bankruptcy), is itself eligible to claim a full $1.6 million from just one quarter’s worth of production. Over the past two months the price of corn has dropped sharply, leaving producers with very expensive inventories.
It remains to be seen if this fund is essential to North Dakota’s ethanol producers and if they can weather the storm without it.
Image credit: haydnseek at Flickr under a Creative Commons license.
Separating the weak from the strong. This is social Darwinism at its best. If Vera Sun and the other ethanol producers in N. Dakota can not maintain viability, it is not the tax payers job to save them.
I agree with you Doug, with the caveat that sometimes decisions of where to build plants are made with local or state-funded incentives in mind.
For example, freight from North Dakota to the end consumer may be more expensive than say Ohio, but because of the state fund, a producer might decide to locate in North Dakota instead. then, when this fund dries up, that producer is at a disadvantage and can’t compete.
It brings a tear to my eye to see gov’t funded greedy farmers running out of gov’t money.
Turning food into fuel has always been a bad idea.
There are a handful of better, and actually viable, sources of ethanol. Corn subsidies are just keeping these better alternatives down.
This is a clear example of the falacy of allowing politicians to make technical decisions. They pushed development of a product that was not economically viable without subsidies.
A much better way to subsidize is to repeal all taxes on profits for a specified period of time, and below a specific percentage of investment.
This way the entrepreneur chooses the product based on analysis of profitability and gets exemption from taxes for the subsidy. The taxpayer gambles nothing and gets the benefits of a viable product that is self supporting.
Given the wild ride that oil prices have been on since they dipped below $10 a barrel in the 1990s, which put many US oil producers out of business (making us more dependent on oil imported from unstable parts of the world full of people who hate us) to $140 a barrel this summer and now down to $40 a barrel just a few months later, it is not surprising that some companies are having trouble surviving.
As far as the food or fuel argument goes, I would rather see corn turned into subsidized ethanol fuel rather than into subsidized high fructose corn syrup. Ethanol mixed with gasoline makes emissions less harmful to health. High fructose corn syrup added to food makes it more harmful to health.
I believe VerSun is a South Dakota company.
Save the Corn Farmers! Order, from Asia, where our cars now come from anyway, Ethanol-specific engined high performance, high economy vehicles! The Asians will be glad to comply! and The Ethanol, in purest form can easily outperform gasoline any time, when burned in engines designed for it alone! Now, you have a product - Ethanol, A producer at home, the corn farmer, and a consumer - the high performance car buyers!, and you have a win win win for America! they no longer burn imported oil, their engines outlast gasoline ones, they get closer to 80, 90 miles per gallon, and produce little if any pollution! Nice dream! Only in America? not likely so! We are controlled by powerful lobbies, and influence groups, and must never step on “Big Oil”’s feet! Remember: These Bastards buried the EV-1 - a fact documented in the movie “Who Killed The Electric Car” available, free to copy,not to distribute, on this very net! Now, the Bastards will skewer Ethanol, any way they can, so that the price at the pump goes into their shareholders pockets - foreign pockets, and that is precisely what they are paid to do! No Patriotism, no fanfare for environmental causes, no “Save the Farmers” simple ROI facts of American corporatist life in our Capitalist ruled “Ho! Ho! Ho! Democracy!”