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Sourcing Iowa Corn for Ethanol: Impacts of Increased Local Processing

Sourcing Iowa Corn for Ethanol: Impacts of Increased Local Processing . Iowa Grain Quality Initiative Advisory Committee January 12, 2007 Connie Hardy Survey conducted by: ISU Extension Value Added Agriculture Program Sponsored by: ISU Extension Iowa Grain Quality Initiative.

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Sourcing Iowa Corn for Ethanol: Impacts of Increased Local Processing

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  1. Sourcing Iowa Corn for Ethanol:Impacts of Increased Local Processing Iowa Grain Quality Initiative Advisory Committee January 12, 2007 Connie Hardy Survey conducted by: ISU Extension Value Added Agriculture Program Sponsored by: ISU Extension Iowa Grain Quality Initiative

  2. Project Objectives • Create a data set to define the scope and variation involved in the current industry activities surrounding grain origination methods, impact on grain storage and co-product handling/marketing. • Measure impacts of growth on the ethanol industry and on its input supply chain.

  3. Survey Design • Interviews with plant managers representing 20 ethanol plants • Processing capacity and corn storage capabilities • Co-products and shipping capabilities • Emerging concerns

  4. Current Iowa Dry-Grind plants • Average production • 60 million gal/yr • Range • 20 mgy – 110 mgy • Plants produce at 105-110% above rated capacity • Most have outbound rail access • Few (none) have inbound rail access

  5. Production and Corn Usage *Operating at actual capacity, approximately 5-10% over rated capacity. **Plants in bordering counties of other states with 50% use assigned to Iowa corn.

  6. Corn consumption and storage Distillers Grains storage 2.62%

  7. Corn sources for ethanol plants • 62% of corn is purchased directly from farmers • 16 plants purchase >50% of corn from farmers • 5 plants tied to local elevators; 60-95% of corn comes from elevator

  8. Source: Robert Wisner, Dept. of Economics, Iowa State University

  9. Iowa has 1.65 billion bushels of on-farm storage (NASS, 2005) Iowa has 1.08 billion bushels of commercial storage (IDALS – Grain Warehouse Division, 2006) Total – 2.73 billion bushels Plant managers encourage on-farm storage; premiums structured for future delivery (2) On-farm storage less likely to be built where cash rented land is prevalent Plan to include questions about on-farm storage in Iowa Rural Life Poll in 2006-7 Farm and Commercial Storage

  10. Corn Quality • US Grade #2 Yellow Corn - no premium for better quality or special traits • Moisture limit: 17% (a few take 18%) • Test Weight low limit: 54 lb/bu • Damage limit: 10% (discount from 5%) • Broken Corn: 12% max Producers must meet #2YC quality spec to sell to ethanol plants. Otherwise, corn is rejected.

  11. Corn Quality (cont.) • Starch and oil measurements are taken by 15 plants, but none use a quality spec for starch and oil • Nutrients are measured by some plants to predict levels in DGs • Mycotoxin testing done on as-needed basis by most plant 12 plants; 10 plants test every load Note: nutrients and mycotoxins concentrate in distillers grains

  12. Grain storage and management practices • Farm • Elevator • Ethanol plant • Follow the link to storage and management questions.

  13. Farm – Grain Storage • Do I have storage? • No • Need to build storage? • Yes - How much is needed - What kind of capacity is needed - Do I need drying capabilities - Do I need delivery capacity - What economic tools areavailable Farm-Elevator-Ethanol

  14. Transportation:Ethanol shipments By Truck 34.7% By Rail 65.3%

  15. Co-products – Carbon Dioxide • All plants “scrub” CO2 to remove residual alcohol • One plant sells CO2 to make dry ice • Four plants are negotiating with potential buyers • Uses: carbonated beverages, dry ice, flash-freeze meats, paper manufacturing

  16. Co-products – Distillers Grains • Estimated Distillers Grains production 4.3 million tons (23 dry-grind plants) • % of DG that is dried • Range: 4 - 94% Average: 75% • Avg. moisture 10% • % of DG sold wet or modified • Range: 6-100% Average: 25% • Avg. moisture 56%

  17. Transportation: Co-product shipments By Truck 44.4% By Rail 55.6%

  18. Co-product markets • Wet distillers grains sold within 50-mile radius • Dried distillers grains go to: • Feedlots in Texas, Kansas, Nebraska, Mexico • Dairies in California, Arizona, and East Coast • Export • Nutrient variability of DG is common • Between plants and within plants • Need a consistent measurement system

  19. Feedlots per county - Iowa Depending on the rate of DG inclusion in cattle diets, it would take between 4 and 12 ethanol plants to provide enough DG for approximately 1,000,000 cattle on feed. -John Lawrence Source: Iowa Beef Center, Iowa State University

  20. Co-product sales • Plants use in-house sales staff and/or brokerage firms to sell distillers grains • Long-term booking arrangements are becoming more common (3-12 months) • 13 encourage long-term contracts • One plant sells DG only on spot market

  21. Emerging uses for Distillers Grains • Feeds (poultry, swine, goats, sheep, horses, aquaculture, pet foods) • Energy source for plant • Fermentation for additional ethanol • Chemical and pharmaceutical • Food • Fertilizer

  22. Concerns for the industry • Corn acquisition at an affordable price • Adequate rail service for products and co-products • Markets for distillers grains • Consistent nutrient content in distillers grains, also flowability • Too few trained employees • Engineers for management positions • Technicians with life sciences/electrical training • Increasing environmental regulations

  23. Summary • Iowa ethanol production currently uses 44% of Iowa’s corn crop and will use 75% of the crop by 2008. • By 2010, planned expansions and new plants could produce 7.4 billion gallons per year of ethanol and 22.4 million tons of DGs, using 2.6 billion bushels of Iowa corn • Increasing supply of DGs encourage increased livestock production, particularly cattle and dairy. • Ethanol plants seek qualified professional and technically trained employees.

  24. Summary • Ethanol plants want to buy from farmers (>60%), and they store <5% of annual corn inventory. • Plants seek corn in good condition and have low tolerance for poor quality (reject) • Producers must plan to store more corn for longer periods in good condition. • Important traits: Storage, drydown, consistency! • Plants generally have less DG storage (2.6%) and seek increasing markets for DGs and CO2.

  25. Training needs • Increased corn production • On-farm grain quality management and storage • Technical training for processing employees • Evaluation of distillers grains quality • Feed uses of distillers grains

  26. Acknowledgements • Iowa Grain Quality Initiative • www.iowagrain.org

  27. Contact information Iowa State University Extension Value Added Agriculture Program www.iavaap.org or www.agmrc.org Connie Hardy Mary Holz-Clause Iowa Grain Quality Initiative www.iowagrain.org Howard Shepherd Charles Hurburgh

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