Iowa Farmer Today
01-27-07
Ethanol profits draw outside interest
By Gene Lucht, Iowa Farmer Today
MASON CITY -- Walt Wendland unfolds the map he keeps in his office.
“X” marks the spot for existing ethanol plants. Question marks show where new
facilities might go up.
“There are some places where local people are looking at trying to raise money,
but large investment groups are trying to come in and basically reserve an area,”
Wendland says. “That’s what’s happening right now.”
Wendland doesn’t want to push outside investors out of the way. Their money is
helping to boost the Iowa economy, and they have the right to do business here.
But, as a longtime farmer and now as president and CEO of Golden Grain
Energy, he is a big believer in local ownership in the ethanol industry.
Also, there are some studies that support his reasoning about local ownership
being a good thing for the state.
The National Corn Growers Association funded a study this past year on the
economic effects on the farm community concerning cooperative ownership of
ethanol production.
The results of that study, released in September, indicate the biggest difference
in economic effect comes from the distribution of profits and the sales of dried
distillers grains (DDGs) to farmer members.
According to the study, a farmer-owned co-op is expected to increase the local
economy by about half again as much (56 percent) as an absentee-owned
ethanol plant.
The study authors also mention nearly half of all the ethanol plants in the country
are owned and operated
by farmer co-ops or limited-liability companies, and they account for 38 percent
of total ethanol production.
But, during the last two years, they add there has been a substantial influx of
non-farmer venture capital into the ethanol market.
Only two of the 43 ethanol plants reported by the Renewable Fuels Association
to be under construction as of September were farmer-owned, and those two
plants represent only about 5 percent of the new capacity.
Economists at Iowa State University also released a study in November about
the effect on local ownership of ethanol plants.
They found ethanol plants, no matter who owned them, created significant
economic opportunity in rural Iowa.
But, the economic effect is greater when local investors also are making profits
on their investments because they spend those profits in the local area.
Also, the higher the percentage of local ownership the more effect the plant had
on the local economy.
As an example, the authors point to Little Sioux Corn Processors in Marcus. It
has 650 local investor-owners.
That plant opened in 2003 and now produces 52 million gallons of ethanol per
year. It buys 1.4 million bushels of corn from local farmers each month and loads
80 to 90 trucks and wagons each day.
In the community, the plant provides 35 jobs at the facility, and may well have
been responsible for a new truck stop being built and a new pharmacy being
opened in town.
Sales at the local hardware store are up 15 percent. More significantly, it was a
major factor in land values rising by 35 percent in the county in the past year.
The study suggests in a three county area, the plant has led to:
>182 new jobs;
>$13.3 million in non-corn input purchases;
>$11.5 million in area household income gains;
>$4.5 million in additional spending in the area; and
>$1 million in annual local and state tax revenues.
For his part, Wendland isn’t surprised by those numbers.
While building ethanol plants in Iowa and throughout the country is a good thing
and will help boost local economies no matter who owns the facility, he argues
having at least some local ownership is a good thing that should be encouraged.
Wendland also adds one other advantage — a sense of pride and ownership by
the community.