Missouri ethanol plant faces cash crunch
Show-Me Ethanol, which had to raise extra cash to start operations last June in Carrollton, Mo., is again asking its investors to ante up. In a letter filed today with the Securities and Exchange Commission, the company asks shareholders to participate in a $10 million capital call by Feb. 2. The money-raising effort is a life-or-death matter for the company, general manager Dennis Alt writes:
It is important that we raise sufficient funds for the Company. If this fundraising does not resolve our immediate capital needs then you will likely lose all of your original investment in the Company.
Shareholders failed to approve a mandatory capital call, but did approve the voluntary fund-raising effort.
According to an earlier filing, Show-Me has too little equity to meet the terms of its construction loan. The default happened because of losses on corn futures contracts, the document explains:
The immediate cause of the covenant breach relates to a significant charge the Company has taken as of September 30, 2008, for its forward purchase corn contracts …. The corn contracts were for a fixed price delivery of corn at a future date, though the ethanol to be produced at that future date was not also sold via a forward contract. After the date of entry into the forward corn contracts, the price of corn declined and likewise the price (of) the ethanol declined. It is our hope that the capital call or voluntary capital contribution will provide us the liquidity and time required to absorb the financial impact these unprofitable forward corn contracts have produced.
Similar losses on futures contracts pushed VeraSun Energy, the second-largest U.S. ethanol producer, into bankruptcy last year. Show-Me Ethanol says it plans to buy corn mainly on a cash basis in the future.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
It seems that the company was half smart (a.k.a., stupid) in contracting to buy corn whil not simultaneously contracting to sell ethanol and thereby “locking in” a gain. That’s how the futures market is supposed to work to reduce the risk to producers and thereby encourage production and stabilize prices.
The fuel ethanol market should be allowed to died. The cost of the ethanol exceeds its value as a fuel and is only viable through government subsidies (your tax money). Further the diversion of this grain to fuel ethanol reduces the amount of grain available to feed the world, increases the cost of chicken, eggs, pork, beef, milk and bread. As for as a replacement fuel for gasoline the ethanol reduces the efficiency of the engine as expressed in mileage (mpg). Ethanol is not a green fuel as the necessary concequence of ethanol production is the production of carbon dioxide. Also it requires more units of energy to produce the ethanol than the ethanol delivers as a fuel. Get the ethanol out of our fuel and let the industry die.
Ozarkpops, Ditto. You hit the nail on the head.
Typical, politicians playing to farmers. These guys spent money like rock stars. They get them all pumped up and now you can’t find any of them. Idiots!!!!