Ethanol industry needs care when hedging – US consultant

25 February 2009 00:05  [Source: ICIS news]

SAN ANTONIO, Texas (ICIS news)--US ethanol producers should take advantage of available risk management tools, but the industry needs to take care to use them properly, a consultant said on Tuesday.

"Hedging can be a good thing but it must be done carefully," Phillip Coffin, a branch manager with financial firm John Stewart & Associates, told the National Ethanol Conference in San Antonio.

Coffin compared hedging to a dental drill, suggesting that results could be disastrous if the person handling the instrument was not trained to do so.

A failed hedging strategy was widely blamed for the demise of VeraSun, formerly the second-largest US ethanol producer.

VeraSun filed for bankruptcy protection in October 2008, after making bad bets on the price of corn earlier in the year.

The company announced in February plans to divest most of its assets.

Coffin said ethanol producers should not panic by trying to avoid risk altogether.

Depending on the timing, risk can also be an opportunity, he said.

Bookmark Simon Robinson’s Big Biofuels Blog for some independent thinking on biofuels
To discuss issues facing the chemical industry go to ICIS connect


By: William Lemos
+1 713 525 2653



AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly