It's not a fun time in ethanol industry

By Janet Kubat Willette
jkubat@agrinews.com

Date Modified: 08/13/2012 1:22 PM

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Tight margins have temporarily idled one Minnesota ethanol plant.

Central Minnesota Ethanol Cooperative in Little Falls has ceased production due to tight margins, said Kevin Hennessy, Minnesota Department of Agriculture biofuels specialist.

Plant operators are using this time to do internal maintenance, said Tim Rudnicki, executive director of the Minnesota Biofuels Association.

The state's 19 other ethanol plants and its one isobutanol plant remain in production as far as he's aware, Hennessy said.

Together, the ethanol plants produce more than 1 billion gallons of ethanol per year and contribute $3.1 billion annually to the state's economy. When indirect and direct benefits are calculated, the economic impact of the state's ethanol industry is $12 billion, Rudnicki said.

Brad Nelson, president of Minnesota Ethanol Producers Association, has witnessed the economic revitalization brought by ethanol. Nelson farms by Albert Lea in Freeborn County.

It was tough to survive on $2 corn, he said. Now, ethanol plants have helped raise the commodity corn price by creating demand. Ethanol plants also provide jobs in rural communities, pay property taxes and have made agriculture financially stronger.

It isn't a fun time in the ethanol industry, but up and down cycles are part of the commodity world, said Brian Kletscher, CEO of Highwater Ethanol in Lamberton.

"People have to take a deep breath," Kletscher said. "People are going to make it work. Farmers are resilient. Livestock producers have always been very resilient and they'll figure it out."

The price of ethanol generally follows the corn market, but the swings aren't quite as large. Formerly, it tracked with gasoline, Kletscher said. In March or April of this year, he saw the biggest spread he'd ever seen between the ethanol and gasoline price at $1.18 per gallon.

The ethanol industry has become an integral part of agriculture, using starch from corn to make ethanol and creating a high-protein animal feed in dried distillers grain.

Livestock producers have come to rely on DDGs.

It's important to keep the RFS because it allows the U.S. ethanol industry to produce domestic renewable fuels, Kletscher said.

There will be droughts and there will be surplus corn crops. Conditions change all the time, he said, but if the nation stays the course and everyone works together, the issue will be resolved.

A temporary drought situation shouldn't be a pretext for destroying a sound policy position, Rudnicki said.

In the Lamberton area, crop conditions are mixed. In areas that have gotten rain the crop will be better than last year. In other areas where there wasn't as much rain, crops don't look as good. He's talked to people from around Alexandria and Crookston who say they have the best crop they've had in a long time standing in the field.