FEW notes from Minneapolis
The weather was gorgeous in Minneapolis for the International Fuel Ethanol Workshop last week. The conference went smoothly, thanks to the seasoned and dedicated staff at BBI International who organize the conference.
A few observations and notes from the conference:
We need to sing the praises of corn. One speaker pointed out that field corn is an amazing feedstock. Yes, sugarcane may yield more per acre, but it is perishable and needs to be promptly processed. The corn kernel, on the other hand, is an ideal storage unit for the starch. The Corn Belt exists because it is an ideal habitat for corn, with ideal soils and weather. And, when you think about the past decade of growth in the ethanol industry, from producing something like 2 billion gallons of ethanol a year to about 14 billion gallons last year, it is a true feat of American ingenuity. Ethanol has truly been a rural economic development bonanza. We need to tell that story more. Furthermore, we need to consider ethanol’s impact on communities and compare that with the struggle to adapt to the oil boom in western North Dakota. I think it would tell a great deal about the difference between the extractive nature of the oil industry and the agriculturalists at the core of ethanol.
Tough economic times make for better companies. Margins are very tight right now, but the market still provides opportunities to make a profit. After months of the ethanol/corn crush margin hovering around 6 cents, during the week of FEW, the crush margin bounced up to nearly 20 cents. One producer shared that even when those crush margins dipped into the negative for a few days at the beginning of the year, his company never lost money.
Investor liquidity is a concern. Many ethanol plants have hundreds of local investors. For those plants built early in the boom, many of those investors got paid back their initial investment and then some. Many of them also are in their retirement years now. How do they get the proper value for their stock? One ethanol manager I talked to said that is why the plant he used to work at was sold. By selling it, there was no question about the value of the stock.
Cellulosic ethanol is no longer five years away. The concrete is being poured and there’s steel in the ground. The first companies are confident their technologies are ready. The unsettling question though, is never far away – with the blendwall upon us, just how will the cellulosic gallons fit into existing corn ethanol market?
It is interesting to note that those speaking at FEW about cellulosic ethanol were nearly all aiming at enzymatic hydrolysis and the handful of folks working with thermochemical methods were in the minority. Perhaps the failure of Range Fuels, which ran out of operating capital before it got its thermochemical process humming, is the reason the thermochemical process is under the radar. It also may be that it just wasn’t on the corn ethanol industry radar, being located far away from the Corn Belt in Georgia. Another spectacular failure – VeraSun – was alluded to many times. It does appear that the lessons from the 2008 economic downturn in the ethanol industry, and nation as a whole, have been well imprinted.