The announcement that the proposed 60 million gallon per year ethanol plant to be built in Hopewell, Va. will operate primarily on barley has Virginia and North Carolina grain growers buzzing with the possibilities.
The Appamattox Bio Energy Plant being built by Osage Bio Energy and their parent company Osage Energy is scheduled for groundbreaking in the fall of 2008, with first production scheduled for early 2010.
“We hope to be ready to use the 2009 barley crop,” says Craig Shealy, president and CEO of Osage Bio Energy. Though the facility can make minor fermentation adjustments to run on corn, the main feedstock for the facility will be barley, according to Shealy.
The conversion rate for ethanol from barley is about 2.5 gallons per bushel, or slightly less than the conversion rate for corn. Advances in fermentation technology may push the conversion rate a little closer to corn, but the weight differential in a corn and barley mix will likely prevent barley-ethanol from reaching the efficiency of corn-ethanol, according to Bill Scruggs, director, agribusiness development, with Osage Bio-Energy.
The biggest advantage for barley versus corn may be more philosophical than technical. “We don’t believe barley is perceived to be a part of the mainstream food supply in the U.S., therefore, all the negative sentiment over the ‘fuel versus food’ controversy generated by corn-based ethanol won’t be an issue with barley-based ethanol,” says Shealy.
He points out that barley-based ethanol actually adds to the food supply by providing a much higher quality feed product than the distillers grain that is a by-product of corn-based ethanol production.
The by-product of barley-based ethanol, barley protein meal, is a totally different amino acid complex than distillers grain from ethanol production from corn, he says. Barley protein meal has more protein and higher quality protein and a better amino acid profile than distillers grain from corn, he adds.
Swine, dairy, poultry, beef cattle and aquaculture have all suffered from the high prices of corn. In the Southeast, the drought, plus escalating feed prices, have driven many out of the livestock and fish business. Bringing a high quality animal feed product to the grain-deficit Southeastern states could provide an economic shot in the arm to the livestock industry, while giving row crop farmers another attractive economic option.
“We can solve a lot of the problems via our ethanol conversion process that has caused barley to be less attractive as a feed grain. We will burn the hulls for energy and ferment the unwanted beta gluteins,” Shealy says.
Some Virginia grain growers are reluctant to commit to growing barley instead of wheat, some remembering in recent years when barley prices dropped to 99 cents a bushel. However, Shealy contends barley production is not likely to dramatically affect wheat production in Virginia and North Carolina, though both are grown during the same general time frame from fall to spring.
“We are looking at nearly five million acres of farmland in our production region on which crops are grown in the spring and summer, but the land is left fallow in the fall and winter. If a small portion of that land were brought into full-season production, it would generate more than enough barley to run our plant in Hopewell,” Shealy explains.
Just 20 percent of the fallow farmland, at an average yield of 100 bushels of barley per acre, could produce enough barley to fuel the Hopewell plant and three other barley-based ethanol plants in the plans for Virginia, North Carolina and South Carolina.
The primary affect of adding up to a million acres of barley will be to increase the number of double-crop soybean acres. One of the big advantages of growing barley is that it is typically harvested 10 to 14 days earlier than wheat. Subsequently, the earlier planting date for soybeans eliminates much of the yield lag associated with double-crop beans behind wheat.
Currently, Virginia and North Carolina combined produce about 60,000 acres of barley annually. Farmer inclination to try new crops on new land will account for some of the needed increase. And, as noted previously, utilizing just a small percentage of the available fallow farm land within a 250 mile radius of the Hopewell plant would provide an adequate supply.
Osage Bio Energy is likewise well-financed. The company recently announced an agreement with First Reserve Corporation for a $300 million financial commitment for the construction of four barley-based ethanol plants. Sister company, Osage Inc. is the largest distributor of ethanol in the Southeast and First Reserve is the leading energy-focused private equity firm in the World.
Using barley, instead of corn offers some obvious advantages, including lower cost, lower cost of production, better land utilization and lower risk for the farmer who grows it.
Virginia Tech Small Grain Specialist Wade Thomason says the use of barley as a cover crop has proven to be beneficial to building a positive soil profile for other crops. If a grower can produce a cover crop that makes him or her money, then barley becomes both an environmentally and economically attractive crop.
Thomason agrees that barley production won’t likely compete with wheat production — not if wheat prices remain strong. Getting the extra days on the front end of soybean production and getting the crop out before freeze occurs in the fall is a huge advantage to double-cropping soybeans behind barley, he points out.
The price of soybeans is indirectly but undeniably linked to barley. If soybean stocks worldwide continue to stay low and if soybean prices stay high, there is a double incentive to double-crop barley, especially if growing it makes double-crop bean yields more comparable to full season soybean yields.
Thoroughbred is a high-yielding (100-120 bushels per acre) hulled barley variety that dominates the current barley acreage in the upper Southeast. Several new hulled and hulless barley varieties are either targeted for release for the 2008 planting season or nearing release.
Currently, the bulk of North America’s barley crop is produced in the upper Midwest and southern Canada. A smaller belt of barley production is in Pennsylvania and Ohio. Regardless of where it comes from, shipping costs make it highly desirable to buy barely as close to the Hopewell plant as possible.
“We will offer growers a premium price for barley, Shealy stresses. “We hope to establish a pricing structure for barley that is tied to corn prices. Then, we hope to offer incentives for large acreage and bushel commitments and for growers who commit early to grow barley,” Shealy says.
“The first two years of operation are critical, and we will be especially interested in offering premium prices to growers during that initial start-up period,” he adds.
Historically, barley prices have ranged from 60-70 percent the price of corn. If the current high price of corn is tied to ethanol production, then there is some reason to believe that barley for ethanol would take on some of the same price advantages for farmers.
In addition to the economic value derived from double-cropping barley and soybeans, barley is also less costly to produce. Using it for ethanol production doesn’t require the high quality standards required in many of the specialty products in which barley is used.
Using barley for ethanol in Virginia and the Carolinas is likewise a natural for Osage Bio Energy. Shealy explains, “A big reason we are here is the world-class breeding and small grain research programs being conducted by Virginia Tech. This whole concept of biofuels from barley came from retired Virginia Tech Small Grains Specialist Dan Brann, who continues to work with us. Combined with the world class breeding program being conducted by Carl Griffey, we feel like Virginia is the center of small grain research in the World — that’s very important to us,” Shealy stresses.
Growers who are interested in learning more about growing barley for the Osage plant in Hopewell can contact Bill Scruggs, best by e-mail at bill.Scruggs@osagebioenergy.com.