19 November 2008 23:16 [Source: ICIS news]
HOUSTON (ICIS news)--US ethanol producer VeraSun said on Wednesday that volatile corn prices and low ethanol values left it to suffer third-quarter net losses of $476m (€376m), compared with $7.8m in net income in the same period one year ago.
The South Dakota-based company, which filed for bankruptcy protection on 31 October, saw operating expenses reach $409m in the quarter, up from $11.5m in third-quarter 2007.
“We continue to suffer operating losses primarily due to the relative prices of ethanol and corn. Such losses, combined with worsening capital market conditions and a tightening of trade credit, resulted in severe constraints on the company’s liquidity position,” the company said in its report.
VeraSun operates 14 ethanol plants with a combined capacity of 1.4bn gal/year (5.3bn litres/year).
The company made bad bets on corn price movements, selling short on corn futures through July, betting the price would fall. The move proved disastrous for the company as corn prices skyrocketed toward a peak of nearly $8/bushel in July.
The company then tried to cut its losses by getting rid of its short options and buying physical corn futures, basically betting that prices would rise.
The price of corn has since dropped significantly, reaching $3.78/bushel on the Chicago Board of Trade on Wednesday, resulting in another loss for VeraSun.
Anhydrous ethanol spot prices were assessed at $1.63-1.66 FOB (free on board) Chicago, according to global chemical market intelligence service ICIS pricing. November contracts for 200 proof ethanol were assessed at $3.85-3.95/gal.
The company fired its president and chief financial officer, Danny Herron, earlier this month.
($1 = €0.79)
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