'Pricey wheat' forces shutdown at ethanol pioneer

Europe's largest wheat ethanol plant is to mothball its operations, in what is believed to be a response to high wheat prices, in another setback to the nascent biofuels segment, Agrimoney.com has learned.

The UK's Ensus plant is, as of next month, to shut capacity temporarily, sources said, a move believed to be in response to wheat prices which hit a record £222.00 a tonne on the London futures market last month.

The plant is, to facilitate the shutdown, accelerating delivery of wheat ordered into June and July, traders said.

Meanwhile, buyers of distillers' grains, a byproduct of ethanol manufacture used as a livestock feed, are seeking supplies of alternative raw materials.

A shutdown could enable the site to tap into newly harvested supplies being offered for lower prices. London's new-crop November lot was trading $173.50 a tonne in late deals in London, a discount of nearly 15% to the expiring May contract.

Representatives of the Ensus plant have yet to confirm or deny the shutdown to Agrimoney.com. Glencore Grain, which is responsible for the site's wheat supplies, referred calls to Ensus.

Sector setbacks

Closure would represent a further hiccup for a UK wheat ethanol industry which has already been dented by building delays, at both the Ensus site, whose construction was held up by industrial action, and the Vivergo plant being developed by Associated British Foods, BP and DuPont.

Completion of the Vivergo site is being delayed by a bitter dispute workers laid off in March, after the site terminated a contract with an engineering group.

Ensus has also been ordered by UK environmental watchdogs to install equipment to tackle odours which have prompted complaints from neighbours to the site.

Supplies freed up?

As talk of the shutdown spread, Glasson Fertilizers, part of the listed Wynnstay Group, said on Twitter that the move would "add to UK ending stocks, taking the pressure of the market".

Traders have long pondered how pressure on UK wheat supplies, following a spurt in exports in the first half of the 2010-11 marketing year, would play out towards the end of season, which ends next month.

Grain merchant Gleadell said in a market report: "We hear rumours that the Ensus bioethanol plant is to be mothballed for an undefined period of time.

"If true this will boost the UK's exportable [wheat] surplus for 2011-12."

At Nogger's Blog, agriculture commentator Dave Norris said: "It would seem that with UK wheat prices now at well over £200 a tonne. the economics of the equation of turning food into fuel clearly don't currently stack up."

source: agrimoney