Value Added Agriculture Program Sourcing Iowa Corn for Ethanol: Impacts of Increased Local...

Value Added Agriculture Program

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Sourcing Iowa Corn for Ethanol: Impacts of Increased Local Processing

Iowa Grain Quality Initiative Advisory CommitteeJanuary 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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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.


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Survey Design • Interviews with plant

managers representing 20 ethanol plants– Processing capacity and

corn storage capabilities– Co-products and shipping

capabilities– Emerging concerns


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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


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Production and Corn UsageSummary Statistics

nEthanol Producedmil gal/yr

Corn Usedmil bu/yr

DGS000 tons/yr

Current Dry-grind Plants

23 1448.0 514.3* 4386.6

Plants, expansions under construction

16 1509.5 524.3 4456.4

Wet Mills 7 1210.0 432.1 3673.2

Nearby, Iowa Draw**

6 402.0 143.6 1220.4

Subtotal 4569.5 1614.3 13736.6

Announced 33 2975.0 1062.5 9031.3

Total 7544.5 2676.8 22752.7

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


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Corn consumption and storage

Current capacity* (mil gal)

Corn Usage* (million bu)

Corn Storage* (thousand bu)

Corn Percent* (storage/usage)

Minimum 24.0 8.6 220 1.87 % Maximum 120.0 42.9 5,500 59.23 %

Average 64.6 22.4 1,214

7.79 % (4.38%)**

Std. Dev. 27.6 10.1 1,108 12.54 %

Sum 1,448.0 516.1 27,920 19,420**

n/a

*Represents 23 dry-grind plants in 2006 **Without two “high storage” plants

Distillers Grains storage2.62%


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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


www.iavaap.orgSource: Robert Wisner, Dept. of Economics, Iowa State University


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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


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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% maxProducers must meet #2YC quality spec to sell to

ethanol plants. Otherwise, corn is rejected.


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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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Grain Storage and Management Practices Training Model

Grain Storage Challenges --- Supplying the Ethanol Industry

Farm ElevatorEthanol

Plant

CommercialCommercialNo Yes

Condominium

Conventional

7 to 14 Days

Conventional

No

SellStoreBuildTemporary

Yes

How much neededKind of capacityKind of drying

How

Meets delivery cycle

Build new

How much neededKind of capacityKind of drying

GEAPS 520 Training


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• Grain storage and management practices

– Farm

– Elevator

– Ethanol plant

• Follow the link to storage and management questions.


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• 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 are available

Farm-Elevator-Ethanol


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Transportation: Ethanol shipmentsEthanol shipments by Rail and Truck

0

20

40

60

80

100

120

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Ethanol Plants

% E

tha

no

l sh

ipp

ed

Truck

Rail

By Truck34.7%

By Rail 65.3%


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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


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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%


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Transportation: Co-product shipmentsDistillers Grains Shipped by Rail and Truck

0

20

40

60

80

100

120

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Ethanol Plants

% o

f D

G s

hip

pe

d

Truck

Rail

By Truck44.4%

By Rail55.6%


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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


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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


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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


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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


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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


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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.


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SummaryEthanol 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.


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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


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Acknowledgements

• Iowa Grain Quality Initiative

• www.iowagrain.org


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Contact informationIowa State University Extension

Value Added Agriculture Programwww.iavaap.org or www.agmrc.orgConnie HardyMary Holz-Clause

Iowa Grain Quality Initiativewww.iowagrain.orgHoward ShepherdCharles Hurburgh


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