Volatile corn prices cripple US biofuel firms

US company Pacific Ethanol has become the latest biofuel firm to suffer at the hands of high corn prices and falling gasoline prices, with the company recording a loss of $54.9m (£35.6m) for the third quarter despite sales rising 56 per cent year on year.

Chief executive Neil Koehler blamed the performance on "unprecedented volatility in the corn and ethanol markets", adding that the company had been disappointed by "the resulting impact on margins".

The company said that corn – the main component of its biofuel – had seen prices rise 55 per cent over the past year to October, while falling gasoline prices had also had a potentially dampening effect on demand for ethanol.

The results will crank up pressure on the company, which is now seeking to delay the repayment of a $30m construction loan that is currently scheduled for the first half of next year.

The performance is also the latest in a long line of financial horror stories from the US biofuels sector, as the whole industry has been hit by soaring corn prices.

Earlier this month, VeraSun Energy, the largest publicly traded ethanol maker, filed for Chapter 11 bankruptcy protection, citing similar problems to those experienced by Pacific Ethanol, while Greater Ohio Ethanol, Gateway Ethanol and Beatrice Biodiesel have also filed for bankruptcy this year.

However, Koehler expressed hope that the election of Barack Obama, a vocal supporter of the biofuel industry, could mark a turning point for the sector.

"With the recent election results, we expect continued strong support for the
Renewable Fuels Standard and the economic development, energy independence and carbon dioxide reductions that ethanol provides," he said.

Obama has stated that he will maintain a goal set by the Bush administration requiring fuel producers to use at least 36 billion gallons of biofuels by 2022, and has also signalled support for a huge expansion of second-generation biofuels that are not based on food stocks.