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Oct 02

Corn Ethanol Boom in Midwestern USA

Posted in Biofuels | Energy Economy | Energy Industry | Ethanol Fuel

Corn Ethanol BoomThe Corn Ethanol Industry in the Midwestern United States is booming. Corn Farmers are excited about the new revenues being generated by the boom. Steadily increasing gas prices have encouraged the expansion of Ethanol manufacturing facilities, and currently employ many people. Ethanol is praised for its lower carbon monoxide emissions. Ethanol is blended with Gasoline and is therefore easier to market. The Renewable Energy Fuels Association states that there are now 105 ethanol plants in operation throughout the Midwest.

When he’s working on his farm, Jim Casey often glances at the ethanol plant looming over the prairie a half-mile away. “You know you’re making money when you see that smoke coming out of the stack,” he says.

Ethanol plants are changing farming across the Midwest. The last time there was such a dramatic shift in agriculture was “when electricity came to the rural people” in the 1930s and ’40s, says Dave Hughes, president of the township board and a farmer who invested in the plant.

Casey bought his shares in the ethanol biorefinery for $1,000 each three years ago. They’re now worth almost $4,000 each. Like the other 950 shareholders in the cooperative, he has gotten $400 in dividends for each share since the plant opened in April 2005.

That’s not the only way his bottom line is being helped. Casey is selling part of his corn crop this fall to the plant for 17 cents a bushel more than he was offered elsewhere. He also saves fuel when he hauls his corn just down the road instead of trucking it to an elevator miles away. Because of the plant’s proximity, the value of his land has increased. “When I get old, that’ll be pretty nice,” he says.

The United Wisconsin Grain Producers plant here employs 36 people, all but two of them from the area. Hourly workers make about $35,000 a year and get profit sharing, incentive pay and full benefits, CEO Jeff Robertson says.

Rising gas prices and the push for less dependence on foreign oil have increased demand for ethanol, which is made by converting the starch in corn into sugars that are fermented and distilled. When it’s blended with gasoline, ethanol can reduce carbon monoxide emissions. Legislation signed by President Bush last year added urgency: It requires oil refiners to use 4 billion gallons of renewable fuel this year and 7.5 billion gallons by 2012.

Those factors have created a rapidly expanding industry that is centered in the rural Midwest.

There are 105 ethanol plants in operation; almost half are owned by local farmers, according to the Renewable Fuels Association, an industry group. Forty-one more are under construction, and seven are expanding. Capacity is 5 billion gallons a year. When the new plants are running, that number will grow to 7.9 billion.

Many small ethanol producers qualify for federal and state tax credits and loan guarantees.

“I think the boom will continue,” says Bob Dinneen, president of the Renewable Fuels Association. “The nation needs to have more domestic renewable energy, and ethanol is going to satisfy a big part of that. … Farmers ought to be re-evaluating what they are planting and responding to the market signals.”

That’s happening here. Corn into cash.

Before the plant opened, Casey planted corn on two-thirds of his 1,500 acres and soybeans on the rest. This year, he moved 20% of his soybean acreage into corn.

Even though it can cost more to grow corn than soybeans because of the cost of fertilizer, Hughes also has shifted more of his 740 acres into corn. The plant, he says, “has changed a lot of things. A lot, and they’re all positive.” Some area farmers who didn’t invest in the plant, Hughes says, “are kicking themselves in the fanny.”

Friesland’s 303 residents have embraced the plant, but not every town is as welcoming. Before settling on the site just off state Highway 33 here, organizers considered locating in Arlington, says Bill Herrmann, president of the United Wisconsin Grain Producers’ board. The concerns of residents there about noise, odor and possible effects on a bird sanctuary prompted them to drop those plans.

Bruce Braaksma, owner of Royal Lumber here, says the plant isn’t much of a nuisance. The 100 or so trucks that enter the plant daily don’t usually go through town, he says. “If it’s dead still, you can hear just a little bit of a hum, and the wind has to be just right to smell it. It smells like an old tavern,” he says.

Besides, Braaksma says, most people in town have been won over by a decline in property taxes since the plant was built. “When your property taxes go down $200 to $300, everybody’s got a smile on their face,” he says.

The plant produces about 50 million gallons of ethanol a year. An expansion that will increase production to 80 million by the end of 2007 is underway. “The profitability of the company is such that this is happening earlier than anybody planned,” Robertson says.

“The presence of an ethanol plant really does ripple through the entire economy,” says Geoff Cooper, ethanol analyst at the National Corn Growers Association. “With the current rate of growth that we’re seeing, that’s going to continue for the next several years.”

Reliance on oil continues. There are some doubts that alternative fuels can end the country’s dependence on foreign oil. For years, studies showed that more energy is required to produce ethanol than is saved when it’s used in gasoline. A University of Minnesota study released in July concluded that ethanol and biodiesel made from soybeans return more energy than is consumed in growing the grains and distilling them into fuel.

The study estimated that using all corn and soybeans grown in the USA for ethanol and biodiesel would offset only 12% of gasoline demand and 6% of diesel demand. In 2005, the U.S. Agriculture Department says, ethanol accounted for about 3% of the nation’s gasoline consumption.

Ray Defenbaugh, president of Big River Resources, a farmer-owned ethanol plant in West Burlington, Iowa, says weaning the nation from foreign oil is important, but his priorities are closer to home.

“We want to create jobs for youth, preserve the community and provide a good return to the investor. The money we make goes right back into the community,” he says. “That’s the reason we built it.”

Casey says his goal is to help himself and other farmers: “It’s more about the end product for ourselves, to have a place to sell our corn, so we can stay in business.”

» Source: USA Today

  • http://www.quotecorn.com B. Price

    But what if corn prices soar? They are hitting all-time highs now. Are paying the farmers really better than paying the filthy rich oil tycoons? Probably…

  • John Savarese

    Ethanol is also particularly in demand in South America. I am selling a winery just outside Montevideo, Uruguay that could be used to produce ethanol from sugar cane.

  • Teddy Osagie

    I am a Nigerian residing here in the Netherlands, and I am just a factory worker. However, I have a very big interest in ethanol productions, and I have been so excited from the positives news from the farmers in America. However, I would like to know how I could have or begin a farm of corn in my country. We have lands begging to be farmed in my country, could it be possible to have a partner who might be interested in having farm here? I need modern farming machineries. And there is the opportunity of having cheap labour.

    I would be glad to hear from any farmers that might be having interest in opening a corn farms in Nigeria. And I have the desires to move forward and to transform the negative impression about my country. I live here in Europe and I have known the benefits of being sincere, honest and to be truthful. I sincerely awaits any person that might be in touch. I wish you all the best.

  • Adrian Z

    Corn Ethanol – good for corn farmers, bad for drivers…

    When the State of Florida decided to mandate a 10% corn-ethanol mix in all automotive and marine fuels, we have realistically seen a decline in fuel economy that is causing us to use much more oil-derived gas than what is being offset by the ethanol mix. This is true for older vehicles as well as 2009 models.

    Too much government waste and subsidizing of a product that has yet to contribute to the reduction in dependence on foreign oil sources. A boondoggle of the highest proportion, which is escaping the vision of a largely unaware public thanks to media shielding of the information…

  • http://www.runningonemptybook.com Phillip J Greene

    Adrian Z. has it right. As the article states, good for corn farmers bad for everyone else. Not only does corn ethanol cost more than it saves but it is a big waster of water, our most precious and threatened resource.The low energy density is a loser too. We, the voters and taxpayers are paying a subsidy to those farmers to boot. There are lots better things to make ethanol from. Let’s kick the corn ethanol growers out and try something else.

    I just read an article that reported that a coating made from tobacco can be used to make solar cells. Now there is a good use of tobacco. Another is using tobacco to clean your car windshield. It cuts the road film very nicely. Corn? It makes great tortillas and whiskey.

  • http://www.runningonemptybook.com Phillip J Greene

    PS. If I were an investor I would steer a thousand miles away from some Nigerian looking for investors. Sounds too much like one of the hundreds of scam e-mails I have gotten.

  • Cornholio

    This is the most misleading concept to date about corn. The only reason the industry is booming is because of artificial government subsidies. Corn has no business as an alternative fuel. The energy it takes to produce one bushel of corn (gallons of water, fertilizer, transportation costs, etc.) is actually very costly and would easily steer any farmer away. However, the government’s will to subsidize the crop makes it a very cheap option now.

    Finally, growing corn to fuel our gas needs is such a ridiculous solution as it is doing more damage to the environment than helping it. All the things that come with growing the corn undo it benefits as a hybrid fuel.


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