The high cost of corn, and subsequently barley, has played a key role in squelching plans to open Appomattox Bio Energy Plant in Hopewell, Va.

Officers of the parent company, Osage Bio Energy, made the announcement late yesterday afternoon (May 23) that the company will not begin production of ethanol as scheduled this spring.

The plant is ready for production and will be maintained by a small crew of workers pending sale of the facility. Designed to run primarily from barley stock, the plant has done test runs using corn as stock, likely in hopes of attracting buyers.

Perdue, a grain buying partner with Osage Bio reportedly will make good on all the barley contracts issued to Virginia growers for the 2011 barley crop. The company bought barley last fall, but has subsequently sold their on-site grain that had been held in storage at the Hopewell facility.

Osage Bio Energy announced that, after a review of strategic alternatives, its board of directors has decided to market the company for sale.

The company will implement a reduction in force effective May 25, 2011. A core team of employees will continue to work at the plant to help facilitate the sale and maintain the condition of the assets for prospective buyers.

First of its kind

“Osage Bio Energy would like to recognize and acknowledge the efforts of the many employees, community leaders and supporters that came together to develop this project over the past few years,” said Heather Scott, company spokesperson. “Appomattox Bio Energy is a first of its kind facility in the United States and represents a unique opportunity for multi-feedstock ethanol production to its future owner.”

Osage Bio Energy was founded in 2007 with the goal of developing and building the first commercial scale ethanol plant in the U.S. capable of processing multiple feedstocks, focusing on winter barley. The site for the plant was selected in Hopewell, Va., and construction began in late 2008. The facility is fully functional and production-ready.

The current high price of corn, which is the base price on which Osage Bio and Perdue were buying barley, was a critical factor in not opening the plant for production. The company had offered barley contracts at 70-80 percent of the trading price of corn.

What would have been a good deal for farmers would have been a disaster in manufacturing ethanol and high quality livestock feed, a by-product of the ethanol conversion process.

Though barley production is up in Virginia, much of the grain needed for full production from the plant would have come from long distances, perhaps as far as Canada. The high cost of transportation was likely another critical factor in the business decision to not open the plant.

Company officials contend this is not the end of the ethanol production story at Appomattox Bio Energy, rather a new direction.