Making Customer-Driven Corn Oil Decisions

By Tom Bryan | April 16, 2013

Nearly all companies claim they make decisions based on their customers’ needs, but I wonder how many really do. The failure rate of startups and small businesses indicates that most of them listen poorly or not at all. Each year, thousands of inattentive companies go belly up, offering products and services too few of us want or need.  

Our industry is different. Ethanol producers listen to their customers, especially when it comes to coproduct specifications, because each of their customers has unique requirements. For the same reason, industry vendors listen and respond to the needs of the individual ethanol plants they call on. DuPont’s Eric Sumner, the subject of this month’s page-32 Q&A, says each of DuPont’s industrial bioscience products is born from VOC, or voice of the customer. 

The concept of VOC recurs this month inside of two data-rich updates on the incredible upsurge of corn oil extraction in the North American ethanol industry. Today, about 70 percent of U.S. ethanol plants extract oil, in varying percentages. Rapid innovation in oil extraction technology has led to large increases in average corn oil yield over the past two years. In fact, average yield has increased more than 50 percent since the beginning of 2011 and is now well over a half-pound of oil per bushel. The most determined corn oil producing ethanol plants are getting eight-tenths of a pound per bushel at $700 to $750 per ton. But again, it’s all about listening to customers. As EPM Managing Editor Holly Jessen reports in her page-34 feature, “Corn Oil Makes the Grade,” most producers extracting corn oil aren’t simply maxing out, but rather setting their oil recovery targets at levels tailored to the fat content needs of their distillers grains customers. So, while one producer may go for maximum oil extraction, another may intentionally strive for a much lower number with VOC in mind.              

According to Paula Emberland, author of our page-54 summary of Christianson & Associates’ recent benchmarking excerpt on corn oil production and revenue trends, about 23 percent of total plant revenues are now derived from distillers grains and corn oil. That number is remarkable given the fact that the industry average just four or five years ago was 16 percent. In fact, in 2011 it was still just 18 percent. Yes, distillers grains prices have risen, but corn oil sales have been the real difference-maker. 

The details in both stories are telling. The bottom line, however, is that plants that produce corn oil simply earn more from coproduct sales than plants that don’t. And the most ambitious corn oil producers—those with unique opportunities to pursue eight-tenths of a pound per bushel—have done well by it. Simply said, U.S. ethanol plants that extract corn oil—especially with VOC in mind—have maintained positive margins over the past few years.

 

Tom Bryan,
President & Editor In Chief
tbryan@bbiinternational.com