NEW YORK, NY--(Marketwire -08/17/12)- Skyrocketing corn prices and lower gasoline demand in the U.S. has seen profits of ethanol producers drop drastically. Producers have begun to idle plants and/or slow production as a result. "Even the most profitable plants out there are barely breaking even in the current environment," said Matthew Farwell, a New York-based analyst for Imperial Capital LLC. Five Star Equities examines the outlook for companies in the Ethanol Industry and provides equity research on Pacific Ethanol Inc. (PEIX) and Gevo, Inc. (GEVO).
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Ethanol producers have battled record high corn prices, and tight domestic supply. The drought in the Farm Belt has drove corn-futures to an all-time high in July. Prices have relaxed a bit since then but have still surged over 40 percent since early June. It is estimated that approximately 40 percent of the nation's corn output is consumed by the ethanol sector. Major producer Archer Daniels Midland recently stated that their ethanol margins had crumbled to a loss of over 20 cents per gallon.
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Pacific Ethanol's mission is to be the leading marketer and producer of low-carbon renewable fuels in the Western United States. Pacific Ethanol owns a 34% interest in and operates four ethanol plants in the Western United States with a combined operating capacity of 200 million gallons. The company recently reported net sales in the second quarter of 2012 were $205.4 million, compared to $214.6 million in the second quarter of 2011.
Gevo is a leading renewable chemical and advanced biofuels company. They are developing bio-based alternatives to petroleum-based products using a combination of synthetic biology and chemistry. The company retrofits existing ethanol plants to make isobutanol, a second-generation biofuel.
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