WASHINGTON, Dec 3 (Reuters) - U.S. ethanol makers can make money producing the alternative motor fuel even with crude oil prices as low as $50 a barrel, the head of the largest U.S. ethanol producer said on Wednesday.
Jeff Broin, chief executive of privately held POET, told a conference that his company was looking at potential purchases of ethanol plants, but declined afterward to say if bankrupt VeraSun Energy Corp VSUNQ.OB was among them.
Broin urged a higher blend rate for ethanol into gasoline, now set at 10 percent, during a speech to a conference sponsored by Farm Journal magazine.
The blend rate should be boosted to 15 percent or 20 percent ethanol to satisfy federal requirements for use of ethanol in the next year or two, Broin said.
Some analysts forecast a large restructuring of the ethanol industry in 2009 because of tight operating margins, a downturn in fuel use due to recession and lower crude oil prices, which make ethanol less attractive.
Broin said the industry could compete for some time if oil prices remained as low as $50 a barrel. The futures price for oil was around $47 a barrel on Wednesday. Corn futures contracts for December delivery closed at $3.48-1/4 a bushel.
"At $4 (a bushel) corn, we can compete with $60-$70 (a barrel) oil," said Broin. "As oil falls below that, it will have some effect on grain prices."
Agricultural economists say oil prices have become a major factor in corn prices, a result of the large amount of corn used for ethanol.
"That is a revolution. We've never had that before," said Wally Tyner, a Purdue University agricultural economist, on Tuesday at a trucking conference. "Whether they (corn and oil prices) are moving up or down, they are moving together." (Reporting by Charles Abbott; Editing by Christian Wiessner)