Flooding Hits Midwest Cornfields, Ethanol Plants

By Craig A. Johnson | July 08, 2008
At the end of June, most of the ethanol industry was moving forward with an eye fixed on the skies. Flooding in the Midwest has affected a few plants. At press time, Archer Daniels Midland Co.'s facility in Cedar Rapids, Iowa, was running at a diminished rate due to a disruption in water service, for example.

According to Jerry Gidel of North America Risk Management Services, as much as 8 percent of Iowa's corn acreage may have to be replanted due to rain. This news is driving corn for December delivery to record highs. At the end of June, corn was trading at $7.55 per bushel at the Chicago Board of Trade. Soaring costs may be good for farmers, but for plants under construction, the price increase will certainly affect bottom lines.

The Iowa Renewable Fuels Association reported June 27 that the floods have halted as much as 10 million to 15 million gallons of ethanol production in the state. However, production was expected to be back to normal by the end of June.

For plants under construction, most of the challenges have been confined to getting materials to the sites. For the most part, no plants reported significant delays or disruptions in construction. "We knew floods in the Midwest could affect a plant since the last big flood in 1993," said one project board member. "We chose [our] site with that in the backs of our minds and built above the 100-year flood plain."

For plants outside the affected areas, construction is still "business as usual." A serious concern for all is the rising cost of energy and the way in which those costs are passed on to consumers. For example, since May 2007, the cost of steel products has increased 17 percent, asphalt has gone up 30 percent and domestic crude oil has increased 51 percent. Time will tell if these costs will slow new plant construction.

In the past month, two plants under construction announced completion. Superior Ethanol LLC in Superior, Iowa, will use Delta-T Corp. technology to produce 50 MMgy of ethanol. Calgren Renewable Fuels LLC will produce 52 MMgy in Pixley, Calif.

Since the beginning of 2008, 35 plants have finished construction and begun production, bringing a total annual capacity of nearly 2.5 billion gallons on line. The number of plants coming on line peaked in May when nearly 1 billion gallons of annual production capacity was added to the industry.