UPDATE 1-Green Plains to temporarily shut down nine ethanol plants -CEO

Fri Aug 2, 2013 5:01pm EDT

By Michael Hirtzer

Aug 2 (Reuters) - Corn-based ethanol maker Green Plains Renewable Energy will temporarily shut down nine of its 10 ethanol plants for maintenance during the next two months as corn supplies tighten ahead of the U.S. harvest, Chief Executive Officer Todd Becker said in an interview on Friday.

The downtime is expected to reduce ethanol output by 10 percent to 20 percent for the ethanol maker from late August through the end of September. The company is based in Omaha, Nebraska.

The company said it typically schedules maintenance downtimes in October through December.

"You time your downtimes in the worst part of the (revenue) curve, and we felt like the end of the crop year was a good place to get our plants ready for harvest," Becker said in a telephone interview with Reuters.

Last summer's worst drought since the 1930s reduced corn yields in the United States, the world's largest producer, and current supplies are the smallest in 16 years, according to the U.S. Agriculture Department.

Still, ethanol makers are earning solid profits with the prices for the grain-based fuel additive trading at a large discount to gasoline while demand is strong for ethanol byproducts such as dried distillers' grains.

Ethanol futures on Friday finished at $2.29 per gallon while gasoline was trading at about $2.99 per gallon, making the cheaper fuel additive of ethanol attractive for fuel blenders.

Green Plains is the fourth largest maker of ethanol in the United States with an annual capacity of 790 million gallons, behind Archer Daniels Midland Co, privately held POET Biorefining and Valero Energy Corp, according to industry sources.

Ethanol makers have paid record-high premiums above Chicago Board of Trade corn futures in efforts to buy the last remaining bushels from last year's harvest from farmers.

Fresh supplies are expected to move into the pipeline beginning mid- to late-September when harvest gets underway. U.S. farmers are expected to harvest a record large corn crop following a mostly favorable growing season this summer.

"We are not very happy with the U.S. corn basis this year because there's been a lot of volatility and it's been extremely high," Becker said.

"We covered all of our July (corn needs) with no issue. We covered all of our August with no issue. We're working on completing on what we need for September and we're starting to see corn move in new-crop months, especially in the eastern Corn Belt," he added.

Becker said that the company's recently acquired plant in Atkinson, Nebraska, was revamped and brought online. Green Plains' other plant - in Nebraska, Iowa, Minnesota, Indiana, Michigan and Tennessee - will each be shut down for two to five days for annual maintenance starting in the last week of August and running through the end of September.

Becker, who also sits on the board of directors at the food company Hillshire Brands Co, said big harvests in the United States and elsewhere in the world will diminish worries about global grain shortages and, with that, criticism that the corn-based ethanol industry turns food into fuel.

"We've going to have excessive carryouts and we are going to have to figure out how we are going to deal with excess corn this year, which is a nice problem to have," he said.

FILED UNDER: