Ethanol Shares Plungeadmin
Shares of ethanol producers dropped after a Citi Investment Research analyst said some small to mid-size companies might have to shut down soon after severe flooding in the Midwest boosted corn prices.
Analyst David Driscoll said the floods caused “irreparable damage to this year’s crop” and pushed prices up, harming ethanol margins.
“As a result of the rapid margin deterioration we believe that many, if not all, of the small-to-midsize producers will be forced to shut down over the next few months,” Driscoll said in a note to clients.
As much as 5 billion gallons of ethanol could drop off the market in the next few months due to the high corn prices, he said.
Driscoll downgraded Verasun Energy Corp. and BioFuel Energy Corp. to “Sell” from “Buy.” Archer-Daniels-Midland Co.’s rating was cut to “Hold” from “Buy.”
In afternoon trading, Verasun lost 57 cents, or 10.7 percent, at $4.76. Earlier it hit a new low of $4.65. Biofuel Energy fell 87 cents, or 22.3 percent, to $3.03. Those shares also hit a new low, at $2.92.
Archer Daniels Midland gave up $3.06, or 8.2 percent, at $34.22.