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Some say ethanol market reaching glut

Associated Press

SIOUX CITY, Iowa -- The Little Sioux Corn Processors plant near Marcus in northwest Iowa began operations on April 3. It will annually process nearly 15 million bushels of corn into 40 million gallons of ethanol and 120,000 tons of distillers' dried grains with solubles.

"Ethanol plants are economic engines vital to the future viability of rural America," said Steve Roe, Little Sioux Corn Processors general manager. The plant employs 29 people, all new jobs to the area.

Many of the plants have been aided by large grants for construction funding, like the $500,000 received by Siouxland Energy and Livestock Cooperative in Sioux Center, also in northwest Iowa, from the U.S. Department of Agriculture.

But there is a downside. Some plants are not proving to be as profitable as anticipated and the market may be reaching a glut.

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The Sioux Center plant is one of only two U.S. plants that use high-moisture corn to produce ethanol.

Bernie Punt, SELC's general manager, said, "we call that the wet corn advantage," since it spares the grain farmer from making an extra trip to the elevator to dry out the corn first.

The plant has been operating since December 2001. When setting it up, organizers were expecting ethanol to bring in $1.19 per gallon.

Punt said the price of ethanol fell two years ago -- the entire time Sioux Center has been open -- and most plants are getting back only about $1.05 per gallon, while the price at the pump is about $1.40. That puts a crimp on profits by tens of thousands of dollars, Punt said. That means many plants are operating at only a bare margin.

Punt said the big spurt of ethanol plants began after groups like Iowa Farm Bureau, Iowa Corn Growers Association and Iowa State University touted the benefits of farmer-owned ethanol plants.

But too many plants jumping on the trend threaten to glut the market.

"I do have concerns about it," Punt said, especially with two more announced plants that could surround the Sioux Center plant -- 30 miles to the northeast by Ashton and another 20 miles west by Hudson, S.D, which had its groundbreaking on Thursday.

"I have no problem with what we have today," Punt said, adding there is "only so much ethanol that can be used here. The market is just not growing. Production is outpacing demand and it is having a serious impact on the industry."

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Punt said the future of ethanol will be based on how quickly the (federal) government can act to open new markets through legislation on renewable fuels standards.

While it only makes up 2 percent of the fuel used in the U.S., the bottom line is that ethanol is needed.

"It is good for the country, good for the environment," Punt said.

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