VeraSun says third quarter operating loss as high as $637 million
In South Dakota, VeraSun Energy announced that it will report an operating loss of up to $637 million in the third quarter, having locked in to prices of nearly $8 per bushel for corn, while corn and ethanol prices fell rapidly through the period.
Yesterday the December contract for corn stood at $3.77 on the CBOT, while ethanol fell to $1.65 per gallon for the December contract. With wholesale RBOB gasoline at $1.21 per gallon, ethanol demand is at a low point for the year based on the spread between ethanol and gasoline prices.
VeraSun had originally projected a loss of up to $103 million for the quarter in guidance issued in September. The company had revenues of $1.08 billion for the quarter, up from $221.9 million in the corresponding period of 2007. The scale of losses is unprecedented in the US ethanol industry, in which VeraSun holds 13 percent of market share.
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derekb | Nov 17, 2008 | Reply
“The second largest U.S. producer, with about 13 percent of the nation’s ethanol capacity, filed for bankruptcy protection two weeks ago citing volatile corn prices and bad bets on corn futures.”
First of all, you don’t make “bad bets” in the futures markets…..Go to Vegas for that. Whoever is or was in charge should be thrown out…You would utilize the markets to hedge your exposure…then you should also learn to either read a price chart or find someone who does. As the price was climbing to $8.00/ bu the technicals were signaling a weakening in the market. How could Verasun protect themselves? By not getting involved with something they don’t have a clue about.
I suspect many other ethanol companies are going to make the same mistake.