NEW YORK - July 28, 2008 - Soaring corn and soy prices on top of rising construction costs and tight credit markets have pushed about a dozen U.S. biofuel plants to file for bankruptcy protection, experts said.
Prices for corn, the feedstock for most U.S. ethanol plants, hit fresh records above $8 per bushel this week as floods this month in the Midwest have caused billions of dollars of crop damage.
"Corn prices are making the feasibility of ethanol plants every day more and more questionable," said Alex Moglia, president of Moglia Advisors in suburban Chicago, which helps biofuel companies restructure.
Meanwhile prices for soy oil, the feedstock for most biodiesel plants, have been high on rising global demand for months, making life miserable for most producers. The miserable profit margins have pushed many makers of the alternative motor fuel to run plants at only about half of their capacity.
Moglia said about 12 small to midsize biodiesel and ethanol plants have declared bankruptcy in recent months. Renova Energy LLC, a company that owns a partially built 20 million-gallons-per year ethanol plant in Idaho, was the latest to declare bankruptcy last week. Kansas-based Ethanex Energy, Inc. declared bankruptcy in March.
"There will be more to follow," said Moglia. Some plants are restructuring their debt and taking steps to manage risks, but many others are not, he said.
U.S. ethanol plants are still opening but plans for the opening of plants through 2009 are being increasingly delayed or scrapped.