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Value Added Agriculture Program www.iavaap.org Sourcing Iowa Corn for Ethanol: Impacts of Increased Local Processing Iowa Grain Quality Initiative Advisory.

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Presentation on theme: "Value Added Agriculture Program www.iavaap.org Sourcing Iowa Corn for Ethanol: Impacts of Increased Local Processing Iowa Grain Quality Initiative Advisory."— Presentation transcript:

1 Value Added Agriculture Program www.iavaap.org 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 Value Added Agriculture Program www.iavaap.org 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 Value Added Agriculture Program www.iavaap.org Survey Design Interviews with plant managers representing 20 ethanol plants –Processing capacity and corn storage capabilities –Co-products and shipping capabilities –Emerging concerns

4 Value Added Agriculture Program www.iavaap.org

5 Value Added Agriculture Program www.iavaap.org 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

6 Value Added Agriculture Program www.iavaap.org Production and Corn Usage Summary Statistics n Ethanol Produced mil gal/yr Corn Used mil bu/yr DGS 000 tons/yr Current Dry-grind Plants 231448.0514.3*4386.6 Plants, expansions under construction 161509.5524.34456.4 Wet Mills71210.0432.13673.2 Nearby, Iowa Draw** 6402.0143.61220.4 Subtotal4569.51614.313736.6 Announced332975.01062.59031.3 Total7544.52676.822752.7 *Operating at actual capacity, approximately 5-10% over rated capacity. **Plants in bordering counties of other states with 50% use assigned to Iowa corn.

7 Value Added Agriculture Program www.iavaap.org Corn consumption and storage Distillers Grains storage 2.62%

8 Value Added Agriculture Program www.iavaap.org 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

9 Value Added Agriculture Program www.iavaap.org Source: Robert Wisner, Dept. of Economics, Iowa State University

10 Value Added Agriculture Program www.iavaap.org Farm and Commercial Storage 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

11 Value Added Agriculture Program www.iavaap.org 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.

12 Value Added Agriculture Program www.iavaap.org 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

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14 Value Added Agriculture Program www.iavaap.org Grain storage and management practices –FarmFarm –ElevatorElevator –Ethanol plantEthanol plant Follow the link to storage and management questions.

15 Value Added Agriculture Program www.iavaap.org Farm – Grain Storage Do I have storage? No Need to build storage? Yes - How much is neededHow much is needed - What kind of capacity is neededWhat kind of capacity is needed - Do I need drying capabilitiesDo I need drying capabilities - Do I need delivery capacityDo I need delivery capacity - What economic tools are availableWhat economic tools are available Farm-Elevator-Ethanol

16 Value Added Agriculture Program www.iavaap.org Transportation: Ethanol shipments By Truck 34.7% By Rail 65.3%

17 Value Added Agriculture Program www.iavaap.org Co-products – Carbon Dioxide All plants “scrub” CO 2 to remove residual alcohol One plant sells CO 2 to make dry ice Four plants are negotiating with potential buyers Uses: carbonated beverages, dry ice, flash-freeze meats, paper manufacturing

18 Value Added Agriculture Program www.iavaap.org 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%

19 Value Added Agriculture Program www.iavaap.org Transportation: Co-product shipments By Truck 44.4% By Rail 55.6%

20 Value Added Agriculture Program www.iavaap.org 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

21 Value Added Agriculture Program www.iavaap.org Feedlots per county - Iowa Source: Iowa Beef Center, Iowa State University 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

22 Value Added Agriculture Program www.iavaap.org 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

23 Value Added Agriculture Program www.iavaap.org 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

24 Value Added Agriculture Program www.iavaap.org 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

25 Value Added Agriculture Program www.iavaap.org 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.

26 Value Added Agriculture Program www.iavaap.org 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 CO 2.

27 Value Added Agriculture Program www.iavaap.org 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

28 Value Added Agriculture Program www.iavaap.org Acknowledgements Iowa Grain Quality Initiative www.iowagrain.org

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

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