Corn Prices Force ADM Ethanol Cuts

The record high price of corn is forcing Decatur-based ArcherDaniels Midland Co. to temporarily trim its production of fuelethanol, a top company executive said Thursday.

Senior Vice President Martin L. Andreas said ADM's fuel ethanolfacility in Peoria will reduce its consumption of corn by about 8million bushels a month.

Andreas declined to say by what percentage the plant's ethanolproduction will drop, but said, "It's a significant cut."ADM is the nation's largest producer of corn-based fuel ethanol,which is used as an additive to make gasoline burn cleaner. Lastyear the company idled a small ethanol plant in North Dakota.The move follows an announcement that Wichita, Kan.-based HighPlains Corp. is cutting its production of fuel ethanol by 20 percentbecause of high corn prices.Corn prices have soared by roughly 70 percent during the lastyear on a combination of strong exports and a poor 1995 corn crop.U.S. grain stocks are projected to fall to their lowest levels sincethe 1970s before autumn harvest replenishes supplies.Poultry producers and small hog farmers have already cut backproduction because corn is a big part of the cost of raisinglivestock.Ethanol producers have been hit particularly hard by higher rawmaterial costs because the price of fuel ethanol is flat comparedwith last year, meaning that producers haven't been able to passalong their higher corn costs.Thursday, corn futures rose to new all-time highs for the thirdconsecutive session on the Chicago Board of Trade in a market growingincreasingly concerned about U.S. supplies.Corn futures quickly shrugged off profit-taking pressure inadvance of the three-day holiday weekend, showing particular strengthin contracts representing the fall harvest.Investors are concerned that cold weather will delay plantingand are afraid the harvest will not be bountiful enough to adequatelyreplace the rapidly depleting stock.Investors also ignored ADM's announcement it will trimproduction of corn-derived ethanol at the Peoria plant.Corn prices have soared by roughly 70 percent during the pastyear on a combination of strong exports and a poor 1995 corn crop."It ain't over yet," said analyst Daniel Markey at AgriAnalysisin Evanston, Ill. "There's real anxiety out there over whetherpeople will be able to get their hands on any grain" in coming weeks."There is an awful lot of emotion in the market right now, andanything is a concern," said Don Roose, analyst at U.S. CommoditiesInc. in West Des Moines, Iowa. Too little moisture "is enough topush the nervous button."December corn rose 5 cents to $3.33 3/4 a bushel at the ChicagoBoard of Trade, the highest price yet for the 1996 crop. May cornrose 2 1/4 cents to $4.26 1/2 a bushel.There's little margin for a late crop, which will begin to becollected in September. The government projects corn stocks beforethe fall harvest will drop to 412 million bushels, the lowest in twodecades and less than three weeks of supply.Contributing: Associated Press, Bloomberg Business News