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Ethanol plant idled

September 26, 2012
Meg Alexander - Staff Writer , Fairmont Sentinel

FAIRMONT - Biofuel Energy Corp has shut down operations at Buffalo Lake, the company's ethanol plant in Fairmont.

Biofuel officials cited the high price of corn, the impact of a widespread drought on the ag industry, and a surplus of ethanol as the reasons for the closure.

The plant employs 56 workers who, for the time being, have kept their jobs.

"We are keeping the plant idled and in such a condition that we could hopefully quickly restart if margins should improve," Mark Zoeller, vice president and general counsel for Biofuel Energy, told the Sentinel. "And we are continuing to operate the elevator."

Resuming production would take just a matter of days, just long enough to prepare the corn and grind it.

When rumors began cropping up earlier this summer about a pending closure, Buffalo Lake plant manager Bob Crockett told the Sentinel the facility was faring well, though he did acknowledge the corporation's profits were down in the first and second quarter of 2012.

Financial reports announced in August painted a grim picture for the industry. In the second quarter, Biofuel reported a net loss of $12.4 million on revenues of $122.8 million. Ethanol sales for the quarter were down by 10 million gallons, compared to 2011. Sales of dry distillers grain dropped as well, from 844,000 tons in 2011 to 453,000 in 2012.

On the upside, wet distillers grain sales increased by about 466,000 tons from the same period last year, and the company sold 10.3 million pounds of corn oil this year. Biofuel just started extracting and selling corn oil this year, which did provide some financial relief.

"It helped certainly, just not enough to overcome the poor margins," Zoeller said.

Buffalo Lake started production in June 2008, which was a difficult time for ethanol producers, as profit margins dropped as the price of corn spiked. Biofuel had pre-purchased corn, but then when prices unexpectedly dropped, the company lost $26.1 million from closing out corn, ethanol and natural gas hedges and $19.9 million of unrealized mark-to-market losses under hedging agreements.

Despite the industry's rollercoaster history and questions of sustainability without government assistance, Zoeller is optimistic.

"We don't think ethanol is going to go away, over and above the fact that the government has a mandate on blending for fuel standards," he said.



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