Penford Corporation to Expand into Ethanol Production; Cedar Rapids Site to Extend into Bio-Fuels Market

Penford Corporation (Nasdaq: PENX), a global leader in
ingredient systems for food and industrial applications, today
announced plans to invest $42 million for approximately 40 million
gallons of ethanol production capacity at its Cedar Rapids, Iowa,
facility. The Company expects the facility to be producing ethanol by
the end of 2007.
   "Penford's entry into ethanol will create value for our
shareholders from more complete utilization of existing facilities and
resources," said Tom Malkoski, Penford Corporation President and Chief
Executive Officer. "We will be able to process more corn by utilizing
existing assets more intensively and plan to convert a portion of our
current production to ethanol use. This initiative also provides an
attractive entry into this growing market through a lower capital
investment and shorter time to market compared with many ethanol
projects."
   Penford has much of the infrastructure contained within the Cedar
Rapids plant to participate in the ethanol market with sufficient
grain handling, separation processes, utilities, and logistics
capabilities. The factory is centrally located near important rail and
ground transport arteries. The ethanol facility will occupy available
space within the existing site footprint. The construction will not
interfere with scheduled production for current customers.
   "Ethanol production represents an important step in broadening the
utilization of our bio-processing assets," Malkoski added. "We believe
the fermentation process of ethanol production will also provide a
platform for future high value products derived from renewable
resources."
   The initial stages of the ethanol investment will be funded
through the existing bank facility. The Company's banks have approved
amending the current credit agreement to permit additional capital
expenditures related to this project. Penford will be reviewing and
evaluating all appropriate structures and funding options for the
optimal long-term financing of the investment in ethanol capacity.

   Penford will host a conference call to discuss the project today,
June 28, 2006, at 1:00 p.m. Central Time (2:00 p.m. Eastern Time).
Please phone [phone] (toll free) or 201-689-8054
(international) at 12:50 p.m. Central Time to participate in the call.
   A replay will be available from June 28, 2006 at 4:00 p.m. Central
Time until July 28, 2006 at 3:59 p.m. Central Time. To access the
replay, please dial 1-877-660-6853 (toll free) or 201-612-7415
(international). Enter account code 286 and conference ID code 207137.
   This call and replay is also available in "listen only" mode
through our Website at www.penx.com under the section titled Investor
Relations.

   Penford Corporation develops manufactures and markets specialty
natural-based ingredient systems for various applications, including
papermaking, textiles and food products. Penford has nine locations in
the United States, Australia and New Zealand.

   The statements contained in this release that are not historical
facts are forward-looking statements that represent management's
beliefs and assumptions based on currently available information.
Forward-looking statements can be identified by the use of words such
as "believes," "may," "will," "looks," "should," "could,"
"anticipates," "expects," or comparable terminology or by discussions
of strategies or trends. Although the Company believes that the
expectations reflected in such forward-looking statements are
reasonable, it cannot give any assurances that these expectations will
prove to be correct. Such statements by their nature involve
substantial risks and uncertainties that could significantly affect
expected results. Actual future results could differ materially from
those described in such forward-looking statements, and the Company
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Among the factors that could cause actual
results to differ materially are the risks and uncertainties discussed
in this release, and those described from time to time in filings with
the Securities and Exchange Commission which include, but are not
limited to, competition; the possibility of interruption of business
activities due to equipment problems, accidents, strikes, weather or
other factors; product development risk; changes in corn and other raw
material prices and availability; changes in general economic
conditions or developments with respect to specific industries or
customers affecting demand for the Company's products including
unfavorable shifts in product mix; unanticipated costs, expenses or
third party claims; the risk that results may be affected by
construction delays, cost overruns, technical difficulties,
nonperformance by contractors or changes in capital improvement
project requirements or specifications; interest rate and energy cost
volatility; foreign currency exchange rate fluctuations; changes in
assumptions used for determining employee benefit expense and
obligations; or other unforeseen developments in the industries in
which Penford operates.