Lower US ethanol prices halt plant construction

By Lisa Shumaker

CHICAGO, Oct 11 (Reuters) - At least three U.S. ethanol plants have recently canceled expansion plans due to high corn prices and ethanol prices dropping as more new plants come online.

Glacial Lakes Energy announced it was postponing construction of an ethanol plant in Meckling, South Dakota. Chippewa Valley Ethanol Co said it is postponing a 40-million gallon expansion of its 45-million gallon plant in Benson, Minnesota.

Earlier this month, VeraSun Energy Corp VSE.N said it was suspending construction of its 110-million gallon plant in Reynolds, Indiana due to a fall in ethanol prices.

Glacial Lakes said in a news release that ethanol prices fell by 50 cents a gallon during the past few months and construction costs increased significantly since buying land on which to build the plant in 2006.

Glacial Lakes, a cooperative, continues to operate a 50-million gallon plant in Watertown, South Dakota, that it is expanding to 100 million gallons. Glacial Lakes is also continuing construction on a 100-million gallon plant near Mina, South Dakota.

Chippea Valley, a farmer-owned cooperative, said the new production capacity coming online was saturating the market, depressing ethanol prices.

"We're operating fairly close to break even at the moment," said general manager Bill Lee. "The new capacity is outpacing the blenders' ability in increased discretionary blending."

On Monday, U.S. ethanol cash margins turned positive after being in the red for two weeks following a sharp drop in corn prices, Citigroup (C.N) said. [ID:nN08321831]

Chicago Board of Trade benchmark December corn futures CZ7 have dropped about 45 cents a bushel, or 12 percent in the past two weeks to $3.42, down from a high of $4.37-1/2 in February.