Valero Energy Corp revealed a 95% collapse in profits at its ethanol operations thanks to a "significant decline" in margins blamed on elevated corn prices, and which prompted it to idle three plants.

The fuels and energy group said that operating profits at its ethanol division had tumbled to $12m in the October-to-December quarter, from $181m a year before.

The slump was blamed on "significantly lower gross margins", squeezed by "a combination of high corn prices and high industry ethanol inventories".

US ethanol inventories returned above 20m barrels during the quarter.

Difficult times 

Valero said it had mothballed three of its 10 ethanol plants in response to the weak market conditions, a move which cut group production to 2.67m gallons per day during the quarter, a decline of 23% year on year.

Nonetheless, gross margin fell to $0.44 per gallon, from $0.91 a gallon, barely enough to cover operating costs and depreciation charges.

The data are the latest sign of the hardship in the US ethanol industry which drove US production down to 784,000 barrels in the week to January 18, the lowest figure since records began in 2010.

Poet, the privately-owned ethanol producer, became the latest group to unveil capacity cuts when it on Friday unveiled the temporary suspension of operations at a Missouri plant "due primarily to a lack of available local corn".

However, Valero's overall earnings rose to $1.0bn, or $1.82 per share, from $45m, or $0.08 per share, a year earlier, boosted by a switch to processing "cheaper domestic crude oil", rather than imported supplies.

Valero shares stood 8.6% higher at $42.16 in midday deals in New York.