Stocks expected to open up; VeraSun, ethanol futures in focus

Stocks are expected to open up this this morning as the major indices showed an increase of 0.2 percent in futures trading.

VeraSun Energy (VSE) announced the suspension of construction on its 110 Mgy corn ethanol plant in Reynolds, IN owing to low ethanol prices. Meanwhile, ethanol futures are on the way up from last week’s 26-month low of $1.51 as blenders are using more discretionary ethanol due to the $1.00 per gallon price spread between ethanol and gasoline.
Yesterday, the Biofuels Digest Indexâ„¢, a basket of 21 public biofuel stocks, rose 0.1% to 98.78 as ethanol stocks steadied after a rollercoaster September which saw new highs for the Index followed by a plunge to new lows caused by numerous analyst downgrades.

MGP Ingredients (MGPI) hit a new 52-week low, falling 2.05% to $10.059, joining VeraSUn (VSE) and Pacific Ethanol (PEIX) in plumbing new depths. Archer-Daniels-Midland was up 0.27% to $33.17 and The Andersons (ANDE) was up 1.6% to $48.79 as diversified companies led the pack.

Losers led winners 2 to 1 as pure plays fell amidst increasing ethanol gloom. Among small caps, Green Plains Renewable Energy (GPRE) was down 3.88% to $10.91 and Xethanol was down 11.59% to $0.61.

The broader markets were up sharply, with the Dow gaining 191.92 points to close at 14087.55, the S&P up 20.29 to 1547.04, and the Nasdaq up 39.49 to 2740.99.

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