Purdue study projects 4.5 billion in added US ethanol capacity in 1st half of 2008, and fast-rising corn prices

A report from Purdue University projected corn prices in the mid-to-high $4 range for 2008-09, and an addition of 4.5 billion gallons in ethanol capacity in the United States. The combination of circumstances could create disastrous producer margins for US ethanol. The study by researcher Chris Hurt projected a slowdown of plant openings in the second half of 2008, with a final capacity for the year of 13.5 billion gallons.

Recently, the Energy Information Administration released the monthly ethanol production figures for September.

For the month, production grew to 556 million gallons while demand fell 54.2 million gallons to 532 million, compared to August. For the year to date, ethanol production has averaged 406,000 barrels per day, with demand at 429,000 barrels per day.

Production has continued at stable levels since mid-year, with monthly production reaching 528 million gallons in May and 527 million gallons in June. Falling demand has created export problems for Brazil as well as a US ethanol glut, despite favorable prices for blenders.

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