Ethanol producer VeraSun files for bankruptcy protection as corn plummets
Humans have known for thousands of years that a good or bad crop can mean bounty or death by starvation. One of the many downsides to relying on crops for a feedstock for anything is the volatility that goes with the price. In old days, people hedged against a bad crop by finding ways to preserve food for the lean times. Today when it looks like prices are heading up, big companies lock in prices at what they think will be a low level. Unfortunately, that can come back to bite you when prices go down and you're stuck paying a higher than market price for raw materials. Such is the case for ethanol producer VeraSun which declared bankruptcy on Friday due to falling corn and ethanol prices. When it looked like a bad crop was likely to send corn prices through the roof, VeraSun committed to paying $8 per bushel for corn. Recently, corn has been selling at less than half that price and ethanol prices have plummeted at the same time. That left VeraSun holding contracts on some very expensive corn and not being able to sell the product at a high enough price to be profitable. The second-largest ethanol producer apparently lost up to $103 million on its price hedging and already has debts of over $1 billion.
[Source: Bloomberg]
Reader Comments (Page 1 of 1)
Sebastian 11:22AM (11/02/2008)
Hopefully, this will teach businesses to reply on non-food sources of biofuels.
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Sebastian 11:23AM (11/02/2008)
Hopefully, this will teach businesses to rely on non-food sources of biofuels.
gorr 11:43AM (11/02/2008)
I told you many times before, what it will take next??? Another death?, another bankrupcy?, more subsidies for the deficit and war on iraq? I told many time and im the sole one on earth having said that foods have to be eaten as a pre-treatment before been turn to bio-methane at the sewage treatment plant on a municipal level then burn in cars, truck, electrical generation plants, etc.
It's just a normal way of living. Car is the normal extention of the normal cityzen. So to have a normal carbon footprint you just use your foods touroughly by eating it first then you propel your car with the remaining energy in it that you don't need for your body.
Child can understand that easilly, aduld don't understand because the're been more time doing sins for a living and more sins mean more stupidity and after a while they want to kill someone like as an exemple iraq peoples or vietnamese peoples.
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John T 7:46PM (11/02/2008)
What do they expect when they get into an artificial market like ethanol. When something only exists because of mandates and subsidies, and worse, is based ona feedstock that is totally price dependent on the food market, fuel prices and the general economy....they're getting what they asked for, and what they deserve.
If they were doing this from switchgrass, or sorghum, or something of that nature, the market wouldn't be bouncing around based on some artificial outside forces so strongly. Has anyone noticed that something like this has happened to the ethanol market almost every year for the last few years? Seriously, there is always some set of ethanol production facilities being moth-balled because of X, Y or Z.
Can you imagine what would happen if/when we stop taxing the hell out of Brazilian ethanol to protect corn farmers? LOL These jokers would be gone overnight.
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