East Kansas Agri-Energy to Halt Ethanol Output in October

East Kansas Agri-Energy LLC, an ethanol producer, plans to stop output at its Garnett, Kansas, plant in October because drought in the Midwest has made the operation unprofitable.

The plant can produce 42 million gallons of the renewable fuel a year and began output in 2005. Record corn prices and scarce supply forced the company to shutter the operation possibly until after the 2013 harvest, Bill Pracht, company chairman, said in a telephone interview.

“The drought is most of the reason,” Pracht said in a telephone interview. “It’s just the unavailability of bushels and then record corn prices. You put the two together and it just doesn’t make it” profitable.

Corn for December delivery rose 9.75 cents, or 1.2 percent, to a record $8.2625 a bushel in Chicago. One bushel of the grain makes about 2.75 gallons of the biofuel.

Denatured ethanol for September delivery climbed 3 cents, or 1.2 percent, to $2.608 a gallon on the Chicago Board of Trade. Prices have gained 18 percent this year.

The U.S. Agriculture Department will cut its corn-harvest estimate by 16 percent tomorrow to 10.929 billion bushels, the smallest in six years, according to a Bloomberg News survey of analysts.

Ethanol output in the U.S. has fallen 15 percent to 817,000 barrels a day in the week ended Aug. 3, from a record on Dec. 30, Energy Department data show.

Valero Energy Corp. (VLO), the third-biggest U.S. ethanol producer, is operating its ethanol output at about 50 percent of capacity because of the higher corn prices, Chairman and Chief Executive Officer Bill Klesse said July 31.

Poet LLC, in Sioux Falls, South Dakota, is the largest U.S. ethanol producer, followed by Archer Daniels Midland Co. (ADM) in Decatur, Illinois.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net and Jeff Wilson in Chicago at 5938 or jwilson29@bloomberg.net

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