North Dakota Ethanol Producers are at Risk as Fund Dries Up
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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.
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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.
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