Surging corn prices tighten ethanol financing

As the main ingredient for ethanol rises to $4 per bushel and oil prices dip, many are concerned about an industry shake-out.

NEW YORK (Reuters) — Financing for ethanol plants has tightened as rising corn prices have made it tougher for producers to turn a profit and an industry shake-out could follow, according to sector bankers and executives.

The price of corn, the main ingredient of U.S. ethanol, has risen to $4 per bushel, making it more difficult for ethanol plants to turn a profit. At the same time, oil prices have fallen since peaking at more than $78 a barrel last summer, cutting into demand for a lower priced alternative.


Both the debt and equity sides have gotten tighter, bankers say.

“For more established companies, their access to the debt market continues to be there, but for newcomers – ones that don’t have any existing plant operations and that want to build from scratch from a greenfield perspective – it will be more difficult for them to raise financing,” said Paul Ho, director and head of biofuels at Credit Suisse.

Reuters