The ethanol industry has continued to expand despite major financial setbacks in the past year, according to a new report from the Federal Trade Commission.

Ethanol producers are expected to exceed the 11.1 billion-gallon renewable fuel standard mandated by Congress even though some have gone bankrupt, the report said.

Rising expenses for corn and natural gas and falling ethanol prices were aggravated by an insufficient access to credit.

"With both credit and capital constraints, industry participants had difficulty meeting their debt obligations and obtaining financing," the report said.

Ethanol producers were expected to pre-pay for their inputs, reducing the amount of money they had in working capital.

Even so, the amount of ethanol produced in the U.S. continued to grow as companies completed construction projects and generally ran existing facilities at close to capacity, according to FTC.

Fewer firms launched new construction projects, and some went bankrupt, but the facilities of defunct ethanol producers were typically taken over by competitors.

"With distressed assets available for purchase, industry participants believe that expanding capacity through acquisition is currently more cost-effective than new construction," the report said.

Such conditions would seem to be conducive to consolidation in the ethanol industry, but the opposite is actually true.

Because the assets of larger bankrupt firms were distributed among a larger number of producers, concentration actually decreased, according to FTC.

"These dynamics make it extremely unlikely that a single ethanol producer or marketer or a small group of such firms could wield sufficient market power to successfully engage in price-fixing or other anticompetitive behavior," the report said.

-- Mateusz Perkowski

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