Ethanol’s Boom Stalling as Glut Depresses Price

[unhappycamper]

Lincolnway Energy, a midsize distillery in Iowa, was once virtually alone in the region. Today, though, competing distilleries are operating and pouring even more ethanol onto the market.


Ethanol’s Boom Stalling as Glut Depresses Price
By CLIFFORD KRAUSS
Published: September 30, 2007

NEVADA, Iowa, Sept. 24 — The ethanol boom of recent years — which spurred a frenzy of distillery construction, record corn prices, rising food prices and hopes of a new future for rural America — may be fading.

Only last year, farmers here spoke of a biofuel gold rush, and they rejoiced as prices for ethanol and the corn used to produce it set records.

But companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut, in part because the means to distribute it have not kept pace. The average national ethanol price on the spot market has plunged 30 percent since May, with the decline escalating sharply in the last few weeks.

“The end of the ethanol boom is possibly in sight and may already be here,” said Neil E. Harl, an economics professor emeritus at Iowa State University who lectures on ethanol and is a consultant for producers. “This is a dangerous time for people who are making investments.”

While generous government support is expected to keep the output of ethanol fuel growing, the poorly planned overexpansion of the industry raises questions about its ability to fulfill the hopes of President Bush and other policy makers to serve as a serious antidote to the nation’s heavy reliance on foreign oil.

And if the bust becomes worse, candidates for president could be put on the spot to pledge even more federal support for the industry, particularly here in Iowa, whose caucus in January is the first contest in the presidential nominating process.


Rest of article at: http://www.nytimes.com/2007/09/30/business/30ethanol.html