COMPANIES Archer Daniels Midland, the US’s biggest ethanol producer, warned on Tuesday that the future of the biofuels sector was under threat unless Congress and individual state governments acted to support the industry.
The warning will concern the White House, which has placed ethanol at the heart of an energy strategy aimed at weaning the US off foreign oil imports.
President George W. Bush has outlined a plan to cut gasoline use 20 per cent by 2017, envisaging a six-fold increase in demand for biofuel over the next decade.
Patricia Woertz, ADM’s chief executive, said she was frustrated at the slow progress of an energy bill mired on Capitol Hill as the two houses of Congress attempt to reconcile their versions of the legislation. She warned that if the bill did not pass it would hamper the development of so-called second- and third-generation fuels such as cellulosic ethanol, derived from plant fibres rather than edible crops.
“We’ll never get to second- and third-generation opportunities if we abandon corn-based ethanol,” she said.
ADM added that state governments were also holding up the growth of the ethanol industry, saying states such as Florida, Georgia and North Carolina had been sluggish in promoting infrastructure and introducing ethanol in gasoline to replace methyl tertiary-butyl ether (MTBE), an oxygenate that has been found to cause toxic pollution. “We’re disappointed it hasn’t come faster,” said Ms Woertz.
Her comments came as ADM said its income from corn-based biofuel dropped 48 per cent in the three months to the end of September compared to the same period last year, as ethanol prices fell. The price of ethanol has dropped more than 30 per cent in recent months due to oversupply.
Several companies in the sector have abandoned constructing new plants and have slashed production. VeraSun, the third-biggest US ethanol producer, last month halted work on a 110m-gallon facility in Indiana, citing oversupply.
ADM said last month it would switch production of corn toward high-fructose corn syrup or lysine production if ethanol became unprofitable. At the same time, ADM, the world’s biggest grain processor, has been hit by the boom in corn prices.
The company’s revenues from corn-based bioproducts fell to $89m from $170m in the fiscal first quarter of last year, dragging down its corn division to a $36m decline from 2006.
Overall, net earnings increased $38m to $441m, while earnings per share rose to 68 cents from 61 cents last year. That was ahead of analysts’ expectations.
