Falling oil and corn prices have left many in the upstart ethanol business scrambling to avoid bankruptcy, but Central Indiana Ethanol President Gary Drook said the situation at the local plant is good.
"The industry has had some problem children, primarily people who've made some mistakes in how they've hedged their input costs, primarily corn and natural gas," Drook said. "Fortunately, we've navigated these choppy waters just fine."
Drook said it was a good first year for CIE, which began operating in July 2007. He credited a conservative strategy and a good corn crop.
"We feel pretty good about where we are in this economy," he said.
Nationally, production on several ethanol plants has slowed as commodity prices have fallen, and some industry players have found themselves overextended. South Dakota-based VeraSun Energy, which owns 17 plants, including Linden and the now-delayed Reynolds plants in Indiana, filed for bankruptcy protection in October and posted a third-quarter loss of $476 million earlier this week.
Drook's opinion is that many of the troubled companies committed to buying corn at high prices when they hadn't yet sold the ethanol they planned to produce. He also said some engaged in flat-out price speculation more akin to a commodities trader than a manufacturing facility.
"They were just making bets on where corn (prices) would go," he said.
Drook said it's critical for CIE that the plant has an abundant supply of corn, so harvest time is particularly important for the business. Drook said most area farmers he spoke with reported above-average yields this year, which was significantly better than expectations.
"We expected the worst and got better than that," he said.
John Woodmansee, the Purdue Extension officer for Grant County, said county farmers in general were pleased with their corn yields this season.
"It was a good year for corn in Grant County," he said. "There's always going to be pockets where it's unusually dry, but overall we did pretty good."
Despite the setback for many manufacturers, the slowdown of new facilities and the plummet in oil prices, Drook said the ethanol market isn't going anywhere.
He points out that renewable fuel standards call for 9.5 billion gallons of ethanol to be blended into U.S. fuels in 2009, a billion more than were required in 2008.
Demand for E85 fuel has slowed, but Drook said unleaded gasoline, or E10, is still 98 percent of the nationwide market for ethanol.
It was also a good first year for Epco, the carbon-dioxide manufacturer located on CIE's site on Ind. 18 between Marion and Sweetser. Drook said that company has been profitable and that CIE shares in those profits.
He said CIE, which employs 48 people, has made the right decisions about hedging, weathered rough waters for the industry and is currently making money.
"I feel very good about where we're at right now," Drook said.