Topeka Cargill Inc. has suspended plans to build a $200 million ethanol plant outside Topeka, citing poor market conditions.
"The economics are not at a point where we see fit to move forward," company spokesman Bill Brady said. "The economics are not where they were a year and a half ago."
Asked when the company might reconsider its decision, Brady said: "Unless market conditions turn around, we have to remain suspended."
Brady wouldn't discuss the factors contributing to poor market conditions. But Jay O'Neil, a senior agricultural economist at Kansas State University, said escalating grain prices were making it difficult for ethanol plants to make a profit.
Corn, used to make ethanol, is at a record-high price at about $5 a bushel, and the cost to build an ethanol plant has doubled in the past five years. If high corn prices continue, O'Neil said, companies could face losses.
"The ethanol industry has fallen on more competitive and difficult times," O'Neil said. "They are going to struggle. You will see a consolidation in this process. Some will go out of business."
A year ago, Emerald Renewable Energy, a subsidiary of Cargill, proposed building the plant on 300 acres northwest of Topeka. The plant would have produced 100 million gallons of ethanol a year.
Emerald also proposed three other plants outside Kansas. Brady said no decisions have been made about those projects.
"Difficult market conditions are industrywide. We're in the process of making some tough decisions," he said.
The proposed plant outside Topeka generated opposition from local residents who feared it would create pollution, increase traffic, deplete groundwater and cause their property values to drop.
"That is great news," Richard Johnson, a Shawnee County resident and a leading opponent said after learning of Cargill's announcement. "That is absolutely wonderful."
However, he said, he remains "guarded" because Cargill is describing the project as suspended.