Corn Stalks As A Revenue Source

Why and How?Don McCabe

Ontario Federation of AgricultureBlue Water Corridor Conference

A Bi-National Approach to Innovation and CollaborationBi-National Clusters: Focus on Bio-industrial Innovation

June 11, 2014Sarnia

Definition of a Farmer

• Cash crop• Corn, soybeans, wheat farmer• Beef farmer• Fruit and vegetable producer• Egg producer• Pineapple plantation• Or……..

Definition of a Farmer • Manager of carbon and nitrogen cycles with input

from the water cycle to produce starch, oil, protein, fuel, fiber and energy for world wide consumers at the highest quality.

The Canadian Biosphere

What Saved Mankind?

Introduction ofTechnology

Everything in thisslide has a pricepoint to market

Combine and Head (AGCO)

Corn (CBOT)

Stalks and Cobs (Valuechain cooperative orcommodity pricing?)

http://www.biobased-society.eu/2013/02/respectful-treatment-of-the-complexity-of-biomass/

End UserPrimary

ChemicalsManufacturing

& Assembly

FinishedProducts

RefinerFossil-based Feedstock

Polymers &Chemicals

Bio-basedFeedstock

ProcessedBiomass

Biomass can be integrated sustainably into the existing fossil-based Chemistry Value Chain

Bio-based Feedstocks- can be blended

into current refinery products as biofuels (eg. ethanol)

- can replace existing primary chemicals for the production of polymers and higher value added chemicals

Processed Biomass- can be used in

finished products that are used in manufacturing and assembly

Amount of Sustainably Harvestable Ag Residue in 4 County Area

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2003 2004 2005 2006 2007 2008 2009 2010 2011* 2012*

tonne

s

Chatham-Kent Lambton Middlesex Huron*Preliminary

Amount of Sustainably Harvestable Wheat Straw(dry tonnes)

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

tonne

s

Chatham-Kent Lambton Middlesex Huron

Amount of Sustainably Harvestable Corn Stover (dry tonnes)

Assumptions For the Cellulosic Sugar Plant

• 250,000 tonnes/yr of corn stover• 115,000 tonnes of sugar produced with 90,000

tonnes/yr of lignin• Capital cost of the plant = $70 Million (1/2

financed over 10 years)

Supply Co-op: Direct Sale Pricing OptionCorn Stover Cost Estimates ($/dry tonne)

Grain corn yield 165 bu/acStover moisture 30%Stover removal rate 30%Stover removed 0.88 dry tonnes/ac8x4x3 foot bale weight 371 kgHarvest costs $/dry tonneDiscbine/stalk chop 20.45Rake 9.09Large square baling 43.14Stack end of field 5.39Storage end of field 8.00Nutrient replacement 11.57Production management issues (15%) 14.65Transportation 75 km 15.97Administration 1.00Stover cost sub-total 129.27

Stover sold at FULL cost to the sugar company

Financial Model for Corn Stover Supply Co-opGeneral Parameters ValuePlant biomass capacity (tonnes/year) 250,000Unit capacity cost ($/tonne/year) $280.00Debt to equity ratio 1.00Interest rate (%) 5.00%Loan repayment period (years) 10.00Price of cellulosic sugar ($/tonne) $400.00Price of lignin co-products ($/tonne) $40.00Cost of corn stover ($/dry tonne) $129.27Production and Revenue ValueCellulosic sugar production (tonnes/year) 115,000Lignin production (tonnes/year) 90,000Cellulosic sugar revenue (M $/yr) $46.00Lignin revenue (M $/yr) $3.60Total revenue (M $/yr) $49.60Cost Items ValueOperating costsCorn stover cost (M $/yr) $32.32Operating costs (M $/yr) $10.00Financing costsTotal capital cost (M $) $70.00Initial loan (M $) $35.00Initial equity (M $) $35.00Interest (M $/yr) $1.03Loan repayment (M $/yr) $3.50Sub-total financing costs (M $/yr) $4.53Net income (M $/yr) $2.75Income tax (M $/yr) $1.25

Return on equity (%) 4.29%

Effect of Grain Corn Yield on ROE and Cost of Stover in a Supply Co-op

Sensitivity Analysis: Corn Stover Supply Chain Costs (From Glenn Farris AGCO)

Top 4 highest supply chain cost influencer related to

baling operation

10 out of 15 top supply chain cost influencers related to feedstock supply operations

(i.e., Production-specific parameters)

decrease by ~$22/std. Mg

increase by ~$29/std. Mg

Bale density alone can decrease supply chain cost by~$8/std. Mg

Bale density alone can increase supply chain cost by ~$9/std. Mg

Effect of Harvest Activities on ROE and Cost of Stover in a Supply Co-op

Stover Supply Compared to a Bioprocessing Co-op

• The Bioprocessing Co-op now sets the ROI at 15%

• Calculations are done now to maintain producer/investor ROI

• The price paid for stover is now calculated out to meet the ROI

Financial Model for Bioprocessing Co-op General Parameters ValuePlant biomass capacity (tonnes/year) 250,000Unit capacity cost ($/tonne/year) $280.00Debt to equity ratio 1.00Interest rate (%) 5.00%Loan repayment period (years) 10.00Price of cellulosic sugar ($/tonne) $400.00

Price of lignin coproductsproducts ($/tonne) $40.00

Cost of corn stover ($/tonne) $110.52Production and Revenue ValueCellulosic sugar production (tonnes/year) 115,000Lignin coproduct production (tonnes/year) 90,000Cellulosic sugar revenue ($ million/year) $46.00Lingin revenue ($ million/year) $3.60Total revenue ($ million/year) $49.60Cost Items ValueOperating costsCorn stover cost (M $/yr) $27.63Operating costs (M $/yr) $10.00Financing costsTotal capital cost (M $) $70.00Initial loan (M $) $35.00Initial equity (M $) $35.00Interest (M $/year) $1.03Loan repayment (M $/yr) $3.50Sub-total financing costs (M $/yr) $4.53Net income (M $/yr) $7.44Income tax (M $/yr) $2.19

Return on equity (%) 15.00%

Effect of Sugar Price on Cost of Stover in a Bioprocessing Co-op

Effect of Sugar Yield on Cost of Stover in a Bioprocessing Co-op

• 80% of Ontario soybeans and corn within 200km

Can we do it? Sarnia BioHybrid Cluster

Bio/Renewable Based

• BioAmber• Cargill• Enbridge• Greenfield Ethanol• Methes Energy• KmX• Solutions4CO2• Suncor Ethanol• Woodland Biofuels

Fossil Based

• Air Products• BP Energy• CF Industries• DuPont• Ethyl Corporation• Exxon-Mobil• LANXESS• NOVA Chemicals• Ontario Power

Generation• Pembina• Praxair• Royal Dutch Shell• Styrolution• Suncor Energy• TransAlta Energy

24Sandy Marshall

"Based on the first term of funding it is evident that BIC is becoming an organization that will create a legacy for Canada in the bioindustrial and bioinnovation sectors."

Mayor Mike BradleySarnia, Ontario

•

Development of a Business Case for a Cornstalks to Bioprocessing Venture

• Agronomic benefits possible with corn stover removal

• Model of bioprocessing co-op helps to derisk project

• Need for a cellulosic sugar mill

http://www.ofa.on.ca/uploads/userfiles/files/cornstalkreport-final.pdf

Summary• The opportunity is here• Companies are looking at Ontario• Sugar from biomass is a new commodity and

investment opportunity • Supply to logistics means numerous regional

locations will be needed with local economic impact

http://www.ofa.on.ca/uploads/userfiles/files/cornstalkreport-final.pdf

When Will We Reach Our Potential?