Green Plains Inc has bought its second ethanol plant in a week in a $93.8 million deal for a facility in Hereford, Texas, owned by Murphy USA Inc, it said on Monday.
The sale of the plant, with an annual production capacity of 100 million gallons, was expected to close this month and follows an announcement last week that Green Plains bought Virginia's sole ethanol plant. The earlier deal, for $18.25 million, was for a plant with an annual capacity of 62 million gallons that had been idled.
Both plants are located far from the Midwestern crop belt, where most of the corn used to make ethanol is grown, and typically result in higher costs to make the gasoline additive. Murphy USA earlier this year told Reuters that the plant was for sale due to the industry's "difficult environment."
Green Plains said $78.5 million was for the ethanol production facility and the balance for working capital. The company touted as an advantage the Texas facility's proximity to a large concentration of cattle feedyards, a top market for the ethanol byproduct dried distillers' grains (DDGs), a protein-rich animal feed.
Overall low crude oil and gasoline prices have weighed on demand for ethanol, pressuring profit margins at a time when U.S. production was expected to be nearly record-large. Further industry consolidation is likely, analysts and traders have said.
CHS Inc, the largest farmer-owned cooperative in the United States, bought two ethanol plants in Illinois during the past year, including one located near the Mississippi River for $196 million.
Pacific Ethanol Inc closed its $184 million acquisition of ethanol maker Aventine Renewable Energy Holdings earlier this year.
Green Plains is expected to release third-quarter earnings early on Tuesday.