Andersons curbing ethanol investmentsadmin
A new ethanol plant in Albion, Mich., owned primarily by The Andersons Inc., produced nearly 14 million gallons of the corn-based fuel in the fourth quarter, and two more plants are under construction, company officials told industry analysts yesterday.
However, Mike Anderson, president and chief executive officer of the Maumee agribusiness, said in the future, the firm will be more cautious with ethanol investment.
“We’re looking at things with a little more scrutiny than nine months ago,” he said. Plus, he said, the cost of building ethanol plants has risen significantly.
Speaking afterward, company treasurer Gary Smith said the rising costs are because of demand for more ethanol plants.
“Manufactured components are going up,” he said. “Then you have steel prices going up, and there’s a shortage of companies that build [ethanol plants].”
But the rising costs aren’t affecting plants the Maumee firm is building in Clymers, Ind., and Greenville, Ohio. The former will start making ethanol in April, the latter in early 2008.
The comments to analysts came a day after The Andersons said it earned a record $36 million in 2006, its third straight year for record profits.
A large contributor to the profit was its ethanol and grain division.
As ethanol plant costs rise, so too is demand for corn needed to make the alcohol-derived fuel additive. A year ago, the price of a bushel of corn was just over $2 on the Chicago Board of Trade. This week, it is close to $4.
Mr. Anderson said the company acted earlier to lock in corn prices for 2007 at a good rate that he would not disclose. It is looking at a similar process for 2008, but is holding back for the moment because it appears that the U.S. corn crop in 2008 will increase.
“Assuming the old usual normal weather, we’re expecting a large supply of corn next year,” he said.
Early estimates and planting intentions by farmers suggest the corn crop could increase by 10 percent in the region, Mr. Anderson said.
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