Farmers Breathe Sigh of Relief

Barley contracts for failed Osage plant will be honored
By Holly Jessen | June 13, 2011

Despite everything that is not known about the fate of the barley-to-ethanol plant in Hopewell, Va., one thing is known. Farmers won’t be left in the lurch.  “Perdue AgriBusiness will honor all of its 2010 and 2011 barley contracts despite what is happening with the Osage Bio Energy plant,” Joe Forsthoffer, company spokesperson, tells EPM.

Osage, the company that built Appomattox Bio Energy, a 65 MMgy ethanol plant, said in a press release May 23 that the plant, while production ready, would not start up. Instead, the plant is up for sale due to unfavorable market conditions. “Osage Bio Energy would like to recognize and acknowledge the efforts of the many employees, community leaders and supporters that came together to develop this project over the past few years,” Heather Scott, company spokesperson, said in the press release.

A few days after the Osage announcement, Perdue AgriBusiness made it clear what it planned to do. The company had contracted for a few barley acres in 2010 and more in 2011, to fulfill the feedstock needs of the ethanol plant. “We will be able to find another home for the barley,” Forsthoffer tells EPM. The company, which works globally on agricultural commodities merchandising, will look at “the full range of options,” he adds. For confidentiality reasons, Forsthoffer didn’t say exactly how many acres of barley were under contract. He did say it is significant, however. “The bottom line is, the producers that are raising barley for Osage, do not have to worry,” he says. “Those contracts are being honored.”

One of the parties that has been unsuccessfully seeking more information from Osage is the city of Hopewell, which expected to collect $2 million in machinery and tools tax revenue from the plant every year, on top of real estate taxes, which it has been collecting. According to a contract between Osage and the city, the company must post a $5 million letter of credit, whether it is operating or not, and Hopewell could withdraw $1 million for missed tax revenue immediately. “I think everybody is still trying to digest what it means that they are not opening, and that they have the plant for sale,” City Attorney Tom Lacheney says. “I don’t know what kind of market there is for a barley ethanol plant.”   —Holly Jessen