Ethanol production likely to drop during cold spell

An ethanol producer says thin margins and cold weather will likely trigger production cutbacks by next week.

Erik Huschitt with Badger State Ethanol in Monroe, Wisconsin tells Brownfield ethanol production has been strong, but there's a big spread between production and demand, so the industry needs to be concerned about that. "The margins are poor enough that we should not see full run rates. The weekly numbers have got to show that at some point. The industry is running at negetive margins. Some are getting really concerning wise and we should start seeing production shut back."

Huschitt anticipates next week's weather will likely prompt some production cutbacks. "The reality is negetive ten degree air temperatures with wind chills that are below that, it's hard to run a plant that has mainly liquid going through it."

Huschitt says many plants will sell back the natural gas intended for ethanol production next week. "We see these unbelievably cold temperatures coming in. We're already seeing some opportunities to sell natural gas that are three times what it was purchased at a week ago, so I would imagine that as an industry, you're going to see some people taking advantage of selling natural gas and not running at full rate, and the only way they're making money is selling back natural gas, anyway."

Weather forecasts are calling for extremely cold air to move into much of the Midwest Sunday and stay for most of the week.