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February 19, 2013

High corn prices hit The Andersons

Clymers plant running as usual, but company’s ethanol group posts 2012 loss

While abnormally high corn prices have squeezed profit margins at The Andersons, which operates an ethanol plant in the Clymers area, a company official says the plant is expected to operate normally for the next few weeks.

The Andersons’ ethanol group this month reported an operating loss of $3.7 million in 2012, far lower than the group’s $23.3 million income in 2011. Two other groups had reported record incomes, but a press release from the company attributed the ethanol group’s loss to weaker demand for gas and the high costs of corn after last year’s drought.

“Current margins are not good, but they, at least in our case, don’t suggest that we cease production,” said Neill McKinstray, president of The Andersons’ ethanol group. That means operations at the Clymers plant “ought to be fairly normal in the next month.”

Two Indiana ethanol plants have stopped producing since summer, according to Associated Press reports. The former New Energy Corp. plant in South Bend was in bankruptcy proceedings and recently sold to a joint venture, reports the Indianapolis Business Journal. The AP reports that the Valero plant in North Linden has been idle since June.

But it’s not merely because of a corn shortage, said McKinstray. There’s corn, but it’s expensive.

“There is still corn available at this moment,” McKinstray said. In fact, since corn’s harvest year isn’t even halfway over yet, there is likely to be plenty of corn for some time yet, and the corn market is expected to adjust for whatever shortage there will be later in the summer.

Corn prices, though high, have also been falling slightly. However, the price of corn is still “orders of magnitude” above what it was just a few years ago, McKinstray said, and combined with lackluster demand for ethanol, it’s pinching the ethanol group’s bottom line.

Even with more than 20 ethanol plants sitting idle, McKinstray said there was still “plenty of ethanol to satisfy the required blending obligations” in automotive gasoline.

Having several plants idle is getting rid of some of the market’s excess ethanol supply and improving the demand a bit, he said, but “frankly the competing impact of the tight corn supply is negating most of that.”

Local farmers haven’t had to bow out of their contractual corn obligations because of the drought, he said.

“So long as I had corn,” McKinstray said, the drought “didn’t dramatically influence the gallons. What it did influence was the profitability.”

And that’s “dramatically reduced.”

“We’re doing what we can to try to respond to that, as most prudent businesses would,” he added. “But there’s only so much we can do.”

Sarah Einselen is news editor for the Pharos-Tribune. She can be reached at sarah.einselen@pharostribune.com or 574-732-5151.

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