|Ethanol plant closing could impact markets|
|September 03, 2015 Jerry Purvis|
World markets, commodity prices and the price of fuel all have impacts on the agriculture industry that keeps the Midwest economic generator spinning, but downturns can have devastating effects.
Torrington, Wyo. found that twice this year as operators announced the closure of the town’s Western Sugar Company factory. And Aug. 24 delivered another blow as Western Ethanol announced it was closing its Torrington plant.
“There were rumors floating around,” said Torrington Mayor Mike Varney. “But the first time I heard about the closure is when I heard it on our local radio station. What a way to inform the mayor of the town.”
The ethanol plant’s equipment came from Louisiana and came to Torrington in the late 1980s. For many years it was the only ethanol plant in Wyoming.
“It’s too bad the company couldn’t do anything to weather the storm,” Varney said. “A small town like ours can’t do much about the stock market in China falling apart.”
Varney added that closures like the ethanol plant always have a domino effect. Between 19 and 23 people are out of work with the closure, and area producers who signed contracts to sell their corn to the plant are out of a ready-made market. And feedlots that buy the spent corn for feed are out of a food supply.
“They use corn down to the last kernel,” Varney said. “It’s a product that gets a lot of use and consequently, this effect will be felt over a long period of time and a large group of people.”
Ethanol is a cost-effective alternative to gasoline as long as gas prices are high. But with the recent drop in gas prices, the plant’s production got to the point where it wasn’t breaking even.
“It’s hard to replace those kinds of jobs in a small community like ours,” Varney said. “It’s good to have the correctional center here, because we’d be in a real mess without it.”
Jon Calahan, grain merchandizer with Crossroads Coop, said Wyoming Ethanol has an exclusive origination contract with West Plains Grain, so the closure would probably have a greater impact on them than other area corn producers. A good share of the Crossroads corn goes to the ethanol plant in Bridgeport.
“The ethanol plant in Torrington uses about 2.5 million bushels of corn a year,” Calahan said. “It’s a big chunk to throw back into the market, but their actual cost of corn was only three or four cents more than others are paying.”
Calahan added he doesn’t think the plant’s closure will have a huge impact on corn prices. But more of the corn in this area might be shipped to ethanol plants in Colorado. “In the grand scheme of things, there will be a slight impact,” he said. “Local markets and the Colorado plants should be able to absorb the excess.”
Shain Shimic, manager with West Plains LLC in Gering, agrees about the fluctuation in grain prices. “We’re still going to be taking corn to the Wyoming Ethanol site for storage,” he said. “It will be run like an elevator.”
He said the closure might affect corn prices, but no one knows yet to what extent. Many stock feeders that currently use corn that has been processed for ethanol to feed their cattle will have to go back to corn, which should offset some of the price fluctuation.
“I don’t see a major disruption in the price of corn because of the closure,” Shimic said.