Ethanol glut could hurt plant prospects

July 11, 2007

Demand for new ethanol plants, of which Indiana has 20 planned or operating, could already be drying up.

Aventine Renewable Energy, a Pekin, Ill., ethanol producer whose shares have fallen 35 percent this year, said a year-long price slump caused by a glut of the fuel additive might last two more years.

U.S. ethanol prices are down 52 percent from an all-time high in 2006, according to Bloomberg News. Aventine is delaying an expansion of its hometown distillery because supply has outpaced demand, a company executive told Bloomberg.

There are 119 U.S. ethanol plants and 77 more under construction, according to the Renewable Fuels Association in Washington, D.C.

In Indiana, 12 ethanol plants and four biodiesel plants benefiting from state assistance are expected to create 620 jobs, $1.5 billion in investment and $29.5 million in income for farmers, according to the state Department of Agriculture.

The state has pledged more than $10 million in incentives, not to mention a tax credit of 12.5 cents per gallon of ethanol produced, to lure plants. The federal government already provides a 52-cent tax credit for every gallon of pure ethanol that plants refine.

Hoosier distilleries are expected to need 380 million bushels of corn annually to make more than 1 billion gallons of ethanol by 2009, or 10 percent of the nation's total.

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