The ethanol market this week will focus on:

• any news about when the 12 idled ethanol plants formerly owned by VeraSun will come back on line,
• blender demand, which should improve as the premium of ethanol versus gasoline fell another 3 cents last week,
• corn prices where the market is carefully watching spring weather and farmer planting intentions.

May CBOT Ethanol futures prices last week fell to a new 3-week low and closed -4.3 cents (‑2.7%) at $1.555 per gallon, moving lower from the recent 2-month high.  Bearish factors included lower gasoline (-0.8%) and corn prices (-3.5%).  In addition, the ethanol market is bracing for the restart in coming weeks of the 12 idled VeraSun ethanol plants that were recently purchased by various entities.  Those 12 idled VeraSun plants have an annual capacity of 1.2 billion gallons, which is up to 60% of the overall idle U.S. capacity of more than 2 billion gallons.

Negative ethanol economics claimed another victim last week as Aventine  Renewable Energy Holdings (AVRNQ) declared Chapter 11.  Aventine has two plants producing a total of 207 million gallons of ethanol per year, which makes it tied with Glacial Lakes Energy as the seventh largest U.S. producer, according to data from the Renewable Fuels Association.  While Aventine said in a press release that it intends to maintain normal operations, there is a possibility that Aventine, like VeraSun, could be forced to idle some or all of its production during the bankruptcy process, thus taking some ethanol supply off the market.  In addition, Aventine is a major marketer of ethanol for other ethanol producers, having sold 754 million gallons of ethanol for other producers in 2008, according to Bloomberg News, which was about 8% of total 2008 production.  Aventine, with its hefty $491 million in debt, will try to shed debt and come out of the bankruptcy process intact with lower costs.  However, if Aventine is forced into liquidation, many smaller ethanol producers that relied on Aventine to market their ethanol will have to find another marketer or sell the ethanol themselves.

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