One of the major topics of discussion at a recent North Carolina cotton production meeting was corn. The Commissioner of Agriculture in South Carolina drives an E-85 ethanol car. And, of greater interest to farmers, corn prices have hit and continue to be at 10-year highs.
The common thread for all this interest is ethanol. Some contend that the furor over increased ethanol production in the U.S. drove prices down. Now that gasoline prices have begun to creep higher and higher, the interest in ethanol and other alternative fuels seems to be growing.
Debate over the 2007 farm bill will likely include alternative fuel provisions. All the interest in the Southeast is driven by what is anticipated, not what is already in place. One of the driving forces of ethanol interest in the Carolinas is the construction of a 108 million gallon per year ethanol plant in Aurora, N.C.
The plant, which is now scheduled to begin construction in early 2008, is one of three such plants in the planning stages for North Carolina. In full operation, these plants would produce over 320 million gallons of ethanol, over a million tons of distiller's grain, and over two million tons of carbon dioxide annually.
From the farmer's perspective, these plants will require 120 million bushels of corn annually to operate. The opportunities for farmers from Virginia to South Carolina to produce corn for these plants are huge.
A new Democratic Congress will write a new farm bill that will set U.S. farm policy for the next five years. And for the first time in decades, congressional leaders have said the farm bill will focus almost exclusively on managing farm production for domestic use.
Ethanol has flat-out rolled right over the old export-driven model, which year after year has failed to benefit U.S. farmers and rural communities.
For the last few decades, U.S. farm policy has encouraged over-production in a few crops like corn, soybeans and wheat. It has done so by eliminating production and price controls and encouraging farmers to plant from fence row to fence row. The goal was, similar to the Archer Daniels Midland ad campaign, to “Feed the World.”
In addition to corn acreage increases, the technology of ethanol production is escalating at a rapid pace. Ethanex, a renewable energy company whose mission is to become the ethanol industry's low-cost producer, announced recently the successful completion of commercial scale pilot plant testing of its proprietary fractionation feedstock technology at the National Corn to Ethanol Research Center (NCERC) at Southern Illinois University at Edwardsville.
The tests produced greater than 22 percent higher ethanol yields per unit of feedstock compared to standard whole kernel corn fermentations.
The NCERC trials utilized the same ethanol production process that is used in standard dry-grind ethanol plants to convert non-fractionated or whole kernel corn to ethanol. Ethanex's fractionated feedstock did not produce any relevant processing difficulties in the areas of cook/liquefaction, fermentation or distillation. The resultant co-product DDG demonstrated superior material handling characteristics with high granularity and resultant flowability.
Terry Ruse, president of Agri-Ethanol Inc, a Raleigh, N.C.,-based company that is building an ethanol plant in Aurora, N.C., says two more plants of equal size are planned in the state. The Aurora plant is scheduled to begin ethanol production in the first quarter of 2008.
Ruse says that currently 114 ethanol plants produce about 5.5 billion gallons of ethanol annually. He contends that as late as 2004, there were no plans for a destination plant, versus an origin plant for ethanol production.
Ruse explains that a destination plant is one is which ethanol brings in the corn to the production site and sells ethanol in relatively nearby markets. An origin site is one in which corn is grown locally for the plant, and the ethanol and byproducts are shipped out.
In the Midwest ethanol production has been an economic success for farmers. Among the states most favorably affected by ethanol production is South Dakota, which has become the first state in the nation to become fully energy independent in terms of gasoline production.
“Ethanol has a billion dollar impact on the South Dakota economy every year, and what's great is that we lead the nation in producer-owned ethanol plants,” Jason Glodt, a senior policy advisor to Gov. Mike Rounds, said. “So what's great is that these are South Dakota residents, not major corporations, and the majority are farmers, he says.”
The three planned North Carolina plants will be built from the same specifications. Each will be able to unload 75-100 boxcars every 10 hours. Each plant will require 40 million bushels of corn annually, and the hope is that as much as half the corn will be bought in North Carolina, South Carolina and Virginia.
“We will have access to ship our products by barge and by rail to a 500 mile radius of the plant, including Atlanta, Ga., Cincinnati, Ohio, and New York City. We can get our products to the New York market in 6-7 days for a nickel a gallon. Ethanol from the Midwest, Ruse says will take 14-16 days and cost 12-17 cents a gallon to deliver.
Ruse notes that the Aurora, N.C., plant will have access to 170 million chickens and 10 million hogs and 2,500 acres of aquaculture ponds within short trucking distance. By comparison, Midwest plants are now paying $25-$35 dollars a ton to get their grain to their customers.
“We are careful to set up our ethanol production processes to produce distiller's grain that can replace corn and soybeans in hog and poultry diets,” Ruse says. By putting distiller's grain back into the livestock industry, Ruse says ethanol and chicken and pork producers can all benefit from the process.
He notes that corn used for animal feeds is about 10-12 percent protein. Distiller's grain that will come from the North Caolina ethanol plants will be 30 percent protein. While the volume of grain available for feed from distiller's grains will be only a third that of corn, the protein value will be equal.
Already, the North Carolina ethanol plants have contracts to sell carbon dioxide and distillers grains. The Carolinas and Virginia are carbon dioxide deficient areas, providing an ideal market for this byproduct. Currently, the bottling plants and other industrial processes that use CO2 have to go to Richmond, Va., or Augusta, Ga., for CO2.
Ruse says his company is working closely with plant breeders to develop both better corn varieties and better hulless barley varieties for ethanol production. Hulless barley, he explains is harvested in the spring, when corn supplies are lowest. These barley varieties also have a higher natural lysine than corn.
In order to process hulless barley, ethanol production from corn has to be shut down. The idea is to eventually have high enough supplies of barley to shut down corn for a while. Barley byproducts are also of high value as aquaculture feed, he says.
In the Midwest in areas where biofuel plants are built, the grower benefits by 5.7 cents per unit, whether that is soybeans, corn or other raw materials used for fuel production. In the Carolinas and throughout the Southeast, the potential is for even greater profitability, if a grower is able to store and dry corn and deliver it at times when corn is in shortest supply to the ethanol plant.
How large the increase in corn acreage in the Southeast remains to be seen. With ethanol plants in the Carolinas not coming on line until the spring of 2008, growers have at least one growing season to develop a strategy to take maximum economic advantage of the new markets.