MGPI plans to stop producing fuel-grade ethanol

By Bryan Sims | February 04, 2009
Web exclusive posted Feb. 9, 2009, at 10:59 a.m. CST

Atchison, Kan.-based MGP Ingredients Inc. confirmed in an 8-K filing with the U.S. Securities and Exchange Commission on Feb. 3 that it plans to exit the fuel-grade ethanol business and temporarily shut down food-grade alcohol production operations at its 78 MMgy facility in Pekin, Ill.

In November 2008, MGPI announced that it would curtail fuel-grade ethanol production at the Pekin plant until market conditions became more favorable. It also closed its flour mill in Atchison, Kan., which can produce 4 MMgy of fuel-grade ethanol. In the SEC filing, the company admitted that "market economics for fuel-grade ethanol have continued to erode, and the company has determined to cease fuel-grade ethanol production at its Pekin plant altogether."

MGPI admitted in the filing that it was in default of its credit facility and was seeking additional funding "to continue as a going concern."

According to MGPI, operations will be shut down for approximately 90 days, which isn't expected to affect its food-grade alcohol customers. The company intends to use excess inventories "to maintain service to its food-grade customers" during the temporary shutdown.