U.S. ethanol industry could face more bankruptcies

More U.S. ethanol distillers may be forced to seek bankruptcy protection if they fail to keep costs down as the industry gets squeezed by oil refiners and gyrating corn costs alike.

VeraSun Energy Corp, the largest publicly traded U.S. ethanol company with 14 distilleries across eight states, said on Friday it was seeking bankruptcy protection.

The South Dakota-based company took a beating after locking in costly contracts for corn, the main feedstock for making the alternative motor fuel in the United States.

Another ethanol company, Gateway Ethanol LLC, declared bankruptcy early last month, and several other small players did so late last year amid a stubborn supply glut of the fuel.

"The short answer is yes," Raymond James analyst Pavel Molchanov said when asked if he expected to see more bankruptcy filings in the ethanol industry.

"There may well be further bankruptcies depending on how long the current downturn in the ethanol market lasts."

U.S. capacity to make ethanol has jumped 60 percent as the government has set blending mandates and given producers incentives in an effort to begin to wean the country off foreign oil.

Capacity is already higher than the government's mandate of 11.1 billion gallons for next year.How the ethanol industry fares in the next few months could help determine whether the next U.S. president will expand mandates and incentives for ethanol or remove them and let the industry survive or fall on its own.

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Source: Reuters