The 2012 drought is not only taking its toll on U.S. Midwest crop and livestock producers. Ethanol plants also are succumbing, as high corn prices dry up their operating margins. Suspension of operations, along with reduced production at many plants, has reduced the supply of distillers’ dried grains with solubles (DDGS), a co-product of ethanol production widely used in livestock diets.
“DDGS has typically been priced at 75 to 85 percent of the value of corn, making it a good alternative ingredient to reduce feed costs,” says Jerry Shurson, professor of swine nutrition and management, University of Minnesota. “Now, it is being priced around 100 percent of the value of corn, making it less attractive.”
East Kansas Agri-Energy, LLC in Garnett, Kan., is the latest ethanol plant planning to quit production. The firm announced Friday plans to temporarily suspend ethanol production operations beginning Oct. 1.
The company was formed in 2001 to construct and operate an ethanol plant and began producing ethanol in 2005 producing 42 million gallons per year annually.
The company cites the prolonged drought reducing the availability of corn and the resulting increase in prices as the main reason for the production halt. These challenges forced the company to reduce plant production capacity by 20 percent last April.
“We have studied the situation extensively and with the challenging economic conditions the Board of Directors has determined that it is in the best interest of the company and its shareholders to halt production at this time,” said Bill Pracht, board chairman. “We will monitor the situation with the hope to resume production of the facility as soon as market conditions allow.”
According to the Renewable Fuels Association (RFA), as of Jan. 1, 2012, 211 ethanol plants in 29 states were producing an estimated 13.9 billion gallons of ethanol and 39 million metric tons of livestock feed including DDGS and corn gluten meal. Each bushel of corn yields 2.8 gallons of ethanol and 17.5 pounds of livestock feed, according to RFA.