Outlook 2012: Pleasant Surprises in 2011

Walt Wendland, president, CEO, Golden Grain Energy, Homeland Energy Solutions
By Holly Jessen | November 15, 2011

In a year of $7 corn, higher oil prices led the way to higher ethanol prices, which added up to profits for the ethanol industry. Golden Grain Energy LLC and Homeland Energy Solutions LLC, 80 MMgy and 100 MMgy corn-ethanol plants located in northeastern Iowa, each had an “extremely good” year, says Walt Wendland, president and CEO. The two companies have a cooperative agreement for shared management.

That profitability was a bit of a surprise. “The industry has its ups and downs,” Wendland tells EPM, “and I’m thinking that this was a much better year than what we thought it might be.”

Record-breaking exports of ethanol were another pleasant surprise for 2011. “We knew we were going to produce probably somewhere around a billion gallons more than what the RFS required and that could be a real downer for prices,” he says. “But with the export opportunities to Brazil, Canada and Europe, we really had a nice balance between production and demand.”

With the Volumetric Ethanol Excise Tax Credit set to expire at the end of the year, profits might be down somewhat in 2012. That built-in cushion between the price of gasoline and the price of ethanol will disappear with the 45-cent credit. Still, Wendland’s outlook for 2012 remains fairly positive. “This year was an up—next year may be a little bit down as we kind of reposition ourselves to operate without VEETC,” he says. Without the blenders credit, the RFS becomes more vital than ever for the ethanol industry. “We’re dependant far more on the RFS staying in place because that becomes the most important thing keeping our product included into the fuel supply,” he says.

In another bit of good news for 2012, despite concerns about possible corn shortages due to poor growing conditions, north central and northeast Iowa’s corn crop looks great. “We have a near bumper crop in this area, so we do have ample feedstock ability to keep the ethanol plants going through 2012,” he says.

Wendland predicts the battle of misinformation about E15 will continue, as the industry works to get the fuel ready for sale at retail stations. Big Oil has been doing everything it can to keep that from happening. “If they could stall E15, they could create a reason to open up the RFS because there wouldn’t be a market for ethanol,” he says. “It really seems like they have made this a real important line in the sand that they are defending. They don’t want to give up any more of their market share so they are really pulling out all the stops to try to stop E15.”

While E15’s opponents have a myriad of excuses why E15 shouldn’t become part of the mainstream fuel supply, NASCAR’s partnership with American Ethanol says otherwise. Golden Grain is one of many financial contributors to the six-year sponsorship deal that made it possible to put E15 in every NASCAR racecar at every race—among other things. “When everybody is saying [E15] won’t work, NASCAR said, ‘We’ve run it a million miles and it works fine,’” he said, referring to the sanctioning body’s September announcement. 

Author: Holly Jessen
Associate Editor, Ethanol Producer Magazine
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