Midwest Ethanol Producers Will Have To Consolidate?

Ethanol is problematic because most American cars can only use about a 10% blend with regular gasoline and it cannot be moved via pipeline like gasoline because of it corrosiveness. Most ethanol is shipped from the Midwest by rail to terminals. So what is the ethanol industry to do? Consolidate? Possibly. There is also the expensive proposition of building specially constructed ethanol pipelines. Brazil is considering such pipelines.

Archer-Daniels-Midlands (ADM) controls about 20% of U.S. ethanol capacity. Small farmer-owned ethanol producers account for about a third of the market with midsize companes make up the rest. Some of these midsize companeis include: Aventine Renewable Energy Holdings, Inc, US BioEnergy Corp, and VeraSun Energy Corp. In order to increase market penetration the ethanol industry might have to bulk up by partnering up. There is also the question of purchasing or building an ethanol plant. An acquisition costs about $2.30 per gallon and building a new facility is about $2.00 per gallon. (The Wall Street Journal, 6-18-07)

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