VeraSun Goes Stupid

According to a report from Forbes it appears that VeraSun Energy (VSE) managed to lock in a significant amount of corn contracts at near the peak of the recent corn run up. In the mean time ethanol prices have fallen in lock step with falling corn prices.

So VeraSun got upside down between their feedstock costs and the prices they could get for the end product. Analysts are now forecasting a 44¢ per share loss for the 3rd quarter.

I have considered the VSE management to be pretty sharp in controlling their costs to maintain profitability in difficult conditions. The ethanol crush spread has stayed positive throughout the recent commodity gyrations as long as the feed stock and ethanol were purchased and sold in the same time frame. It appears company management screwed this one up royally. Now they are trying to sell 20 million shares into the market to raise some capital. It may take them some time to recover from this one if they do. My mistake for owning a small position in VSE.

Note: I have a long position in VSE

You can read the article here.

Posted in Categories: Commodities, Contributor, External Research, Stocks, USA.

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