February 04, 2009

Some common sense in Kansas - ethanol not profitable

Even with huge government subsidies (our tax dollars), large-scale fuel-grade Ethanol is not profitable to manufacture. One company is realizing this and shifting gears.

From the Kansas City Star:

Instead of making ethanol, let's make a profit
Prospects for the ethanol business have gotten so bad that one Kansas-based producer has decided to stop making the fuel additive and will focus instead on making a profit.

The problem for MGP Ingredients Inc. is that it's not entirely sure it will be able do that. Its problems have put the Atchison, Kan.-based company in default on its bank loans.

Lenders are working with MGP but also have “strongly encouraged” the company to find additional lenders.

“The company's ability to continue as a going concern is dependent on the company obtaining additional financing in the near term and on the willingness of its existing lenders to exercise further forebearance and extend the (current credit) facility termination date beyond Feb. 27, 2009,” MGP's announcement said.

MGP said it is talking with other prospective lenders.

The company had suspended its production of the fuel-grade alcohol in November. This morning, it’s decided to pull the plug on ethanol permanently.

“The decision represents another huge step in our business transformation process, which is intended to ultimately return MGP Ingredients to profitability,” the announcement said.

MGP blamed “extreme and sporadic swings in ethanol demand” and the volatility in corn prices, oil prices and gasoline prices.

MGP said it will devote its Pekin, Ill., plant to making food-grade alcohol. The moves will force 79 workers into a temporary layoff.

Much better - a different set of laws but do-able and food grade alcohol sells for a lot more. It's used in medicinal tinctures and for making cheap liquors and vodkas.

Posted by DaveH at February 4, 2009 02:13 PM | TrackBack
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