Tate & Lyle said it is to keep its $260m Fort Dodge plant on ice, highlighting lower prices of ethanol and of byproducts such as distillers' grains, which look set to remain "soft".

Margins for ethanol made from corn, while modestly profitable at spot prices, remain "under pressure" for forward sales, the refining and sugars group said.

Markets for byproducts of making ethanol from corn, many of which are used in animal feed, were being held back by the weak price of alternatives and would remain "soft" in the US, Tate added.

The company said that, "given the lack of clear forward visibility" in these markets, it had "not yet determined" the timing for completing its Fort Dodge plant in Iowa, which was mothballed in April before it had even opened.

Tate, which processes around 2% of US corn consumption at three other plants, commissioned Fort Dodge in 2006 to process 150,000 bushels of corn a day, and with capacity for 100m gallons of ethanol.

Shares ease 

Tate's update came as it restated that profits for the six months to the end of September would fall below those of a year before, "which benefited from strong [byproduct] revenues during the commodity price peak".

Sales of sucralose, its zero-calorie sweetener, had risen by double digits by volume, but by single digits in revenue terms.

The report prompted a modest slide in Tate shares, which stood 4.6p lower at 410.4p in morning trade in London.

However, Graham Jones, the Panmure Gordon analyst, said that with a new chief executive, Javed Ahmed, set to take charge later in the autumn "we doubt there will be much appetite for selling the stock in the near term".

At Icap, Andy Smith retained his "buy" rating on Tate stock, noting its 5.5% dividend yield.

Growing market 

Distillers' grains represent a fast-growing alternative for livestock feed, with US exports jumping nearly 90% to 4.5m tonnes last year. It typically costs about 20% less than corn.

Mexico is the biggest market, accounting for about one-quarter of US exports, followed by Canada at 17%.

However, China, a huge exporter of soybeans largely for livestock feed, is growing in importance, taking 150,000 tonnes in the first six months of 2009.

"Chinese interest in [distillers'] grains is logical," broker Linn Group said in a report earlier this month.

"Livestock production in the country has skyrocketed, as the country's farmers attempt to meet the dietary demands of a burgeoning middle class. There are almost as many pigs as people, as the total hog supply soared above 1.1bn in 2009."

In the UK, Savills last month alerted livestock farmers to the potential of byproducts from new ethanol plants.