Outlook For VeraSun Not So Bright

US ethanol producer VeraSun's shares took a thrashing Wednesday after the company announced it was caught on the wrong side of the corn market.

The company lowered its third-quarter forecast to expect a net loss in the range of $63.0 million to $103.0 million, or 40 cents to 65 cents a share. Analysts had been expecting a third-quarter loss of two cents a share.

VeraSun's shares plunged 73% to $1.41. Despite this the company announced a 20m stock offering of shares, which seems to indicate it needs the cash and this is the easiest way to get it in the current market.

VeraSun said in July, when futures approached $8 a bushel, it unwound short position used to hedge corn it purchased to cut its margin exposure, effectively pricing the grain in the cash market. Believing prices would rise further, the firm then used “accumulator” contracts that required it to buy more corn at above market prices as futures dropped.


See also: Is The Writing On The Wall For US Ethanol From Corn Industry?