Save the Date - Upcoming Customer Appreciation EventsDate: Aug 11 - Sep 15, 2017
Thank you for your loyal business. Join us at an upcoming customer appreciation meal.
Ethanol production gets more efficient as global demand keeps growing.
Farmers, cooperatives and ethanol manufacturers work together to help fuel rural America. Today, they’re pumping out more than 13.3 million gallons of ethanol domestically a year.
“We’re proud to be producing locally grown fuel for America,” says Dave Hassebrock, an Ames, Iowa, farmer and investor in a community-owned ethanol plant. Formed in 2004, Lincolnway Energy, LLC, is adjacent to a Key Cooperative location in Nevada, Iowa.
“It’s one big circle that benefits all parties,” says Hassebrock. “We sell corn to the co-op, which sells it to the ethanol manufacturing plant. The plant sells ethanol to the co-op for its Cenex® fuel blending pumps, where we fill up our farm’s flex-fuel vehicles. The plant also produces DDGS, which we buy for our feedlot. We use cattle manure to fertilize our corn, which starts the process all over again.” As an owner, Hassebrock shares in the profits of both the ethanol plant and co-op.
“I can deliver a load of corn to the ethanol plant and bring home a load of DDGS, and end up with money in my pocket,” he says. “Cattle love the taste of DDGS. It’s a quality feed that helps rate of gain.”
The Iowa farmer sees a strong future for clean, renewable, domestically produced fuels. “When we started the plant, interest rates and corn prices were low. The first gallons hit a sweet spot in the market. Since then, ethanol margins have tightened, but it’s a good industry with a solid future. The American farmer tends to overproduce, and America needs the fuel.”
Global Growth, Domestic Challenges
“Corn-based ethanol is the lowest-cost source of octane on the planet,” says Brian Jennings, executive vice president, American Coalition for Ethanol. “That factor plays a big role in its global growth. In 2013, U.S. ethanol exports were more than 600 million gallons, and we are looking at even stronger exports in the future.”
Ethanol production is becoming more efficient, adding to U.S. supplies. “One of the fantastic things about this industry is its constant innovation — from using less electricity and water to development of corn traits that express a higher amount of starch for increased ethanol production,” says Jennings.
Domestically, the ethanol market outlook is “relatively strong,” he says, building on momentum that began in 2013 with a record corn harvest, declining corn prices and a slow increase in U.S. gasoline use.
“We have a significant grassroots base of people who are enthusiastic about what ethanol has done for rural America, and CHS has been very active in helping make E85 available at local cooperatives. But political challenges exist,” says Jennings.
“EPA has proposed artificially limiting the level of ethanol in U.S. fuel. The original statue called for 14.4 billion gallons in 2014, and EPA has proposed reducing that to 13 billion gallons,” he says.
“We need to redouble our efforts to ensure governors, legislators and members of Congress are champions of ethanol. It’s incumbent on farmers to hold their elected leaders accountable as serious decisions are made about the future of renewable fuels in this country.”
Demand Outpaces Production
“In general, the picture looks good for global biofuels demand,” says Maxwell Thomasson, director of global trading and marketing, CHS Renewable Fuels Marketing. “Production is expected to increase about 3.2 percent annually between 2014 and 2017, while demand is expected to increase 4 to 5 percent. The tricky piece will be matching demand to production around the world.”
CHS provides a critical link between biomass farmers, ethanol manufacturers and blenders, while managing biofuels distribution efficiently and cost-effectively. Expert marketing, trading and logistics teams in Brazil, Singapore, Switzerland and the United States, plus recent CHS investments in terminals and infrastructure, help facilitate reliable distribution of any volume.
This year, CHS expects to move nearly 1 billion gallons of ethanol to domestic customers and a growing number of international destinations. “With changes in the U.S. renewable fuels standard, this country has surplus ethanol. The good news is that we have a strong global team and an excellent footprint to help U.S. ethanol producers export their products,” says Thomasson.
The primary demand drivers are interest in cleaner-burning fuel, desire to improve energy security and changes in government mandates, along with rapid urbanization and an expanding middle class in some countries.
“Our current focus is on originating ethanol from four key areas (the U.S., Central America, Brazil and Pakistan) and moving it to Europe, Asia, India and Africa, where demand is growing,” he says.
In Asia, the ethanol demand outlook is “very bright,” says Bertram Chuang, senior trader, CHS Global Renewable Fuels Marketing. “India has a burgeoning biofuels program. Countries such as Thailand have greatly reduced exports to meet a doubling of domestic demand in just two years.
“Vietnam has excess production capacity, but is struggling to cope with feedstock prices. China and Indonesia are also ones to watch, being the first and fourth most populous countries, as their governments consider the future direction of their biofuels programs,” he says.
Although CHS is a new entrant to the Asian ethanol space, “Within the first six months we have become a significant player in the Philippines, the largest open-fuel ethanol market in Southeast Asia,” says Chuang. “Having a physical presence has been integral to our success as it allows us to be closer to our clients and quickly respond to myriad complex challenges and opportunities in the Asian market.”
Providing constant supplies for customers is a priority, adds Thomasson. “Using our strength as a cooperative and our grain marketing and crop nutrients capabilities, we are reaching out to growers to help provide year-round dependability. We’re starting in Brazil and looking at opportunities in Mexico, Eastern Europe, Australia and elsewhere.”
“The future of biofuels is about moving away from first-generation feedstock, which will influence where the next generation of biofuels comes from,” Thomasson says. “Using cellulosic sources such as switchgrass is a noble goal, but probably not the future on a large scale due to the volume of biostock required. If you look at the biofuels plants being built in the next five years, many are leaning to non-food-grade sources such as sweet sorghum, industrial sugar cane and non-food-grade rice.”
Update your browser to view this website correctly. Update my browser now