This was a story waiting to happen. Yesterday VeraSun Energy Corp., one of the largest ethanol producers, accounting for 13% of production, went bankrupt. They placed wrong way bets on corn futures, which provided them fixed costs during the 3rd quarter, which eventually put them underwater when corn and ethanol prices crashed. Corn is the underlying component of (corn based) ethanol. VeraSun was already dealing with tight margins, a large amount of debt to service, and competition from lower oil prices. Look at the crash in corn and ethanol prices during the past six months, as well as VeraSun's stock chart. Here is their press release. It's crazy how bubbles just pop out of nowhere. Hopefully oil prices will go back up again so the ethanol bulls can still ride the wave.
Ethanol Futures (Source: CBOT)
VeraSun Energy Corp. Stock Chart (Source: Stockcharts.com)
