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Who will benefit from biofuels’ distress?

By Staff | Apr 10, 2009

Answering the question of who will benefit most from the biofuel industry’s distress, a panel of bankruptcy financiers and bankers said it will most likely be Big Ag, and not Big Oil, as most people expect.

A group of 16 Fort Dodge-area residents watched a nationwide webinar Thursday at Iowa Central Community College in which panelists said the long-term prospects for biofuels is bullish because of the federal renewable fuels standard.

According to panelist E. Kenneth Pentimonti, a principal at Paladin Capital Group of Washington, D.C., giant ag companies like Monsanto and Cargill are most likely to be the entities to consolidate the ethanol industry. Pentimonti said that commodity traders are more experienced and comfortable hedging the price of ethanol with commodity grains than oil companies. When asked if ethanol will continue to have government support if Big Ag gains controlling interest of the industry, panelist Burl Haigwood, of Bethesda, Md., director of program development for Clean Fuels Development Coalition, said it would continue.

“It was the big companies that started ethanol,” Haigwood said. “Regardless who is making it, it’s working. We’re outpacing Iran and Argentina.”

Panelist Jerome Peters Jr., senior vice president of TD Bank Financial Group, agreed, saying that government support will be more focused based on ethanol’s role in the country’s biofuels future, rather than plant ownership.

Panelist Wayne Weitz, senior managing director for GlassRatner Advisory & Capital Group LLC, of Atlanta, Ga., said the long-term prospects of biofuels in general, and ethanol specifically, “is bullish.”

He said that although there is a surplus of ethanol on the market today, the ever-increasing renewable fuels standard will eventually soak up the excess, making it necessary to put idle ethanol plants back into production. He estimated that may be in 2010 or 2011.

Greg Burnside, a grain buyer for Ag Partners LLC, in Albert City, said he attended the webinar to hear what was the near-future prospects for the ethanol industry.

Ag Partners was a corn supplier for the ethanol plant in Albert City, formerly owned by VeraSun. He said the cooperative is waiting to hear from new owner Valero if each plant will purchase grain from local sources, or if the seven new plants, including one in Fort Dodge, will be fed from a central supplier.

The webinar was hosted by Iowa Central Community College, James Kersten, associate vice president of ICCC’s external relations and government affairs, said the college had a built-in investment to host the webinar in that it has a biofuels course and is developing a biofuels testing lab.

“We hope we’ve given a good picture of the current biofuels industry,” Kersten said. “We have all of this capacity surrounding us and we want to help educate consumers and engine manufacturers that biofuels work.”

When the discussion turned to ethanol plants needing to develop more diverse byproducts besides livestock feed to become more profitable, Kersten said a plant like Tate & Lyle, in Fort Dodge, “is well-positioned” because of it manufactures a number of products besides wet-milling corn ethanol.

Says ethanol immune from other effects

None of the panelists thought that low carbon fuel standards, which were implemented in 2008 by California, would affect the future of corn ethanol if adopted by other states. They also think ethanol is immune from losing its stature as the fuel stock of choice to cellulosic, sweet sorghum, sugar cane or sugar beets.

Contact Larry Kershner at (515) 573-2141 or by e-mail at editor@messengernews.net.

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