ConAgra withdraws plans for another U.S. ethanol plant

Increased costs, lower profit outlook for ethanol cited in decision

By Dave Hannon -- Purchasing, 1/24/2008 12:15:00 PM

Escalating costs caused ConAgra to withdraw plans for a new 100 million gallon/year ethanol production facility in Clovis, N.M.

"We made a decision to withdraw our air permit application because of the increased costs for building and operating an ethanol plant in Clovis, New Mexico," spokeswoman Stephanie Childs said in an interview with Reuters. Childs also said current costs of finding water sources to run the New Mexico plant and construction materials were much higher than when the company first began the application process more than two years ago.

Also recently, a Marathon Oil official said the dramatic increases in ethanol capacity plans in the past year have made many companies reconsider new plant construction, as profits would be very thin. 

"You're seeing so many new plants coming on this year that it's going to be difficult for the market to keep up with all this supply," Cliff Cook, Marathon's head of supply, told the Reuters Global Agriculture and Biofuels Summit."There's going to be a rough spot for ethanol plants for probably the next 18 to 24 months and then we see the supply and demand getting more in balance and you'll see a more rational market."

See also: Ethanol prices to stay put amid market stress