East Kansas Agri-Energy, LLC in Garnett, Kan., will temporarily suspend operations beginning Oct. 1.
The move comes in the midst of discussion between livestock and corn producers about the ability of the corn supply to satisfy all demands and maintain reasonable prices.
The company said prolonged drought conditions have had a negative impact on the availability of corn and have driven up feedstock prices. Both availability and cost were given as the main reasons for the halt of production. Additionally, the demand for gasoline is down resulting in surplus ethanol stocks. These challenges led to the East Kansas Agri-Energy to reduce plant production capacity by 20 percent last April.
Bill Pracht, board chairman said the company has studied the situation extensively and with the challenging economic conditions the Board of Directors has determined that it is in the best interest of the company and its shareholders to halt production.
"We will monitor the situation with the hope to resume production of the facility as soon as market conditions allow," Pracht said.
East Kansas Agri-Energy joins plants in Iowa and Nebraska which have either slowed production or halted production entire as the drought limits feedstock supplies and increases costs.
The company employs 35 people and a portion of the staff will be impacted by this decision. Pracht also added, "Every effort will be made to treat our employees as best we can, many of our employees have been with the company since the plant opened. Knowing the impact that this decision has on our communities and families made the decision even more difficult."
East Kansas Agri-Energy formed in 2001 to construct and operate an ethanol plant and began producing ethanol in 2005 producing 42 million gallons per year annually.
Ethanol production is already down 20 percent this year, according to Bob Dineen of the Renewable Fuels Association, and the industry will bear the brunt of price rationing. Last year, ethanol plants produced 13.7 billion gallons of ethanol. This year that is expected to slip to 12.5 billion gallons. The mandate is 12 billion.
Biodiesel, which uses mainly soybean oil as feedstock, remains strong. The impact of drought on the soybean crop won't be fully known for several weeks.