Ethanol Plants Slow as Flex-Fuel Vehicles Grow

Ethanol Plants Slow as Flex-Fuel Vehicles Grow

The rush by corn farmers to channel their crops into the alternative fuel market, and by entrepreneurs looking to get rich quick with corn-to-ethanol processing plants, seems to be causing some repercussions.

A trio of ethanol plants that use corn to brew the fuel have canceled expansion plans because of high corn prices and falling wholesale prices for ethanol caused by a flood of new plant construction, Reuters and other news agencies reported recently.

Glacial Lakes Energy, according to Reuters, said it is postponing an ethanol plant planned for Meckling, South Dakota; Chippewa Valley Ethanol said it is delaying expansion of its plant in Benson, Minnesota; and VeraSun Energy Corp said it was suspending construction of a plant in Reynolds, Indiana.

Chippea Valley, a farmer-owned cooperative, told Reuters that new production capacity just now coming online was saturating the market and depressing ethanol prices...

Meantime, U.S. automakers have promised that half their domestic production will be ethanol-capable by 2012.

Are we witnessing a recipe for a fuel shortage, or companies exercising good business sense?

John O'Dell:  is an AutoObserver Senior Editor. Follow @AutoObserver on Twitter.