VeraSun corn plan taints rival ethanol producers
CHICAGO, Dec 3 (Reuters) - Bankrupt ethanol producer VeraSun Energy Corp's VSUNQ.OB move to cancel contracts to purchase corn for eight of its plants might make it harder for rival ethanol companies to buy supplies from farmers.
Growers that were burned by VeraSun's bankruptcy might be wary of selling their grain to other producers, said Mike Woolverton, a grain market economist at Kansas State University.
"This really has a lot of farmers upset," he said. "What it is doing is creating a climate of distrust among farmers with ethanol plants because VeraSun is not the only organization that manufactures ethanol that is having difficulties right now."
VeraSun, in particular, might have trouble buying corn for its plants that were still operating, said Darrel Good, professor of agricultural marketing at the University of Illinois.
A VeraSun lawyer said on Tuesday that seven of the company's plants that it acquired when it purchased rival U.S. BioEnergy Corp earlier this year would cancel contracts for corn that was to be delivered through Jan. 15. The company's plant in Welcome, Minnesota, would cancel contracts for deliveries through Jan. 31. [ID:nN02271155]
Cumulatively, the eight plants are capable of processing about 263 million bushels of corn into 750 million gallons of ethanol a year.
Corn prices have so far not been affected by the news that part of the ethanol market, which many farmers have been counting on to keep corn prices high during the past three years, has disappeared for at least the next six weeks.
Spot basis bids for corn have been steady to firm at grain processors and elevators around the U.S. Midwest this week.
Most farmers were not rushing to book any new sales to replace the VeraSun ones, said Dennis Rollenhagen, a farmer in Wells, Minnesota, which is about 30 miles (48 km) south of the VeraSun plant in Janesville, Minnesota. The Janesville Plant was one that canceled its contracts.
But some growers have already spent some of the money they had planned to collect from those sales on input costs for next year such as fertilizer or diesel fuel.
"Those are the guys that were counting on the check ... and now they do not have the money," said Rollenhagen, who does not have any contracts with VeraSun.
Farmers may have booked a large portion of the canceled contracts when cash prices for corn were hovering around $7.00 a bushel. Growers who will need to find new contracts for corn they had agreed to sell to VeraSun would receive significantly less for their supplies. Corn prices were currently around $3.00 per bushel throughout much of the Midwest. (Reporting by Mark Weinraub; Editing by Marguerita Choy)
