St. Louis Post-Dispatch
09-09-07
Iowa town showcases the ethanol boom
By Jeffrey Tomich
ST. LOUIS POST-DISPATCH
COON RAPIDS, Iowa
The 6-foot-tall wooden ear of corn carved from a tree trunk near the center of
town leaves no doubt what engine powers this town of 1,300.
For more than a century, Coon Rapids revolved around corn. Farmers grew it;
grain elevators stored it and shipped it. The seed company founded by Roswell
"Bob" Garst in the 1930s was the largest employer. And locals in this western
Iowa town still talk about Soviet Premier Nikita Khrushchev's 1959 visit to the
Garst Farm to help understand why American agriculture was so successful.
Today, corn is still king. But the saying has a new meaning thanks to Tall Corn
Ethanol, a 54 million-gallon distillery that rises from rolling farmland just east of
town.
The $54 million plant is not unlike the 100 or so others scattered across the
Midwest, and dozens more are coming. Just in Illinois and Missouri, developers
are seeking air permits for no fewer than 58 new ethanol plants. Often, they're
being touted as a way to help ease America's foreign oil addiction and an elixir
for flagging rural economies.
Ask Coon Rapids residents, merchants and civic leaders, and there's little doubt
the ethanol boom and the local plant have produced tangible gains, including
dozens of good-paying jobs and generous returns for investors who risked
thousands of dollars to get the plant built.
"The benefits have trickled down to real people in a small town," said Liz Garst,
whose grandfather co-founded Garst & Thomas Seed Co. "We would be
considerably worse off without it."
Just the same, residents understand the risks of becoming even more closely
aligned with a single commodity and don't expect this modern day gold rush to
cure the town's ills.
Indeed, even since Tall Corn Ethanol moved in, population and school enrollment
have dwindled further. Family farms continue to disappear. And local residents
increasingly bypass the local stores on Main Street and drive 30 miles to the
county seat, Carroll, to do their shopping at the Wal-Mart or Hy-Vee.
The Tall Corn Ethanol plant is run by Sioux Falls, S.D.-based Poet, the nation's
No. 2 ethanol company. It began production in August 2002 with 38 employees.
Capacity has since been expanded and the plant now has 54 employees with a
$3 million payroll, General Manager Owen Shunkwiler said.
Many of the plant's employees come from within a 30-mile radius of Coon
Rapids, and so does most of the golden-yellow corn that's mashed and brewed
into fuel.
For the plant's chief mechanical operator, it meant an opportunity to find a goodpaying job closer to home after years of working in the oil fields of Wyoming and
West Texas. For the plant's lab manager, it was a second career and a chance to
put her microbiology degree to use. Previously, she had taught science at nearby
Carroll High School.
THE BENEFICIARIES
Perhaps no one has benefited from the ethanol rush more than the 450 or so
investors — many of them farmers from within a five-county area who were
hoping it would mean a few extra cents a bushel for their corn. Collectively, they
risked almost $10 million of their own money to get the plant up and running.
Organizers, most of them civic leaders in Manning, 30 miles west of Coon
Rapids, held a series of meetings across the area to find investors. Oil was $30 a
barrel at the time. Gasoline was $1.60 a gallon, and much of America hadn't
even considered running their cars, trucks and SUVs on fuel made from corn.
Stakes in the plant were sold in units, each consisting of three shares at $10,000
apiece for a minimum buy-in of $30,000. Farmers banded together to scrape up
the needed cash, and Farm Credit Services volunteered to loan money with
nothing down. In addition to the cash, investors are required to deliver 5,000
bushels of corn a year to feed the plant.
Garst bought $120,000 worth — one block of stock for each of the four family
farm entities. The investment paid off.
Last year alone — a year that even the ethanol industry's biggest boosters say is
unlikely to be repeated — the dividend on a $10,000 share of Tall Corn Ethanol
LLC was $16,000. And the value of the stock has also gone up. Garst recently
sold a $30,000 block of stock for $80,000.
"Financially, it's been the best investment I've ever made," she said. "The rate of
return has been unbelievably good."
Those without direct ties to the plant have benefited, too.
The Tall Corn Ethanol plant and others in the area gave local farmers a new
market for millions of bushels of corn that traditionally had been shipped east to
the Mississippi River and on to the Port of New Orleans for export, or west as
livestock feed.
In the past year, the ethanol rush and growing demand for corn to feed the plants
has helped push up the price by about $1.50 a bushel since Tall Corn was built
five years ago, putting thousands of extra dollars in the pockets of local farmers.
Many of them have used some of the money to buy combines and new pickups,
take vacations or renovate their homes.
HOT PROPERTY
As grain prices have risen, so too has the price of the land it's grown on.
On an unseasonably cool Friday in late August, about 100 farmers, most wearing
caps, blue jeans and T-shirts, snacked on coffee and free doughnuts at a hall
across from the St. Joseph's Catholic Church in Jefferson, Iowa. Many were
there to take part in the auction of 1,100 acres of rolling farmland covering parts
of Guthrie and Greene counties, a short drive east of the Tall Corn Ethanol plant
on Highway 141.
The auctioneer in khakis and a white button-down shirt nudged bids higher with a
sing-song cadence as his assistants walked the aisles and yelped as bidders
flashed bright yellow cards with their number on it, indicating a wish to raise the
price by $25 an acre.
Within an hour, 1,112 acres of Iowa farmland was sold for about $4.6 million.
Each of the seven tracts covering parts of Guthrie and neighboring Green
counties was sold for $3,500 to $4,950 an acre. Five years ago, the average
value for the very best farmland in these counties was just over $2,500 an acre.
Statewide, the value of Iowa farmland rose 10 percent last year to a record of
$3,204 an acre in 2006, according to Michael Duffy, a farm extension
economist at Iowa State University in Ames.
The ethanol boom and surge in land values are welcome news for many farmers.
But others say it's only hastening agricultural consolidation and serving as a
further barrier for young farmers.
"I have a different vision for agriculture in Iowa," said Charles Carpenter, coowner of Beaver Creek Farm, just southeast of Coon Rapids, with 30 beehives
for making honey and beeswax candles and 15 acres of heirloom apples and tart
cherry trees. "I personally feel that the industrial model does not serve us well
economically, socially or culturally. I would dump ethanol into that bad boy
realm."
A REAL BOOM?
There are questions, too, about whether the ethanol boom is creating the number
of jobs proponents say it is. In February, the Iowa Renewable Fuels Association
published a report claiming the ethanol industry supports 27,000 jobs in the state.
If thousands of secondary jobs are being created, they aren't very evident.
As someone who farms 300 acres southwest of Coon Rapids with her husband,
Gary, the Tall Corn Ethanol plant was a welcome development, said Doris
Meschek.
"It's had a very nice impact," she said. "Right now, the agriculture community is a
lot more confident than it's been in a few years."
But as someone who runs a small antique and used furniture store just off Main
Street, it's had no effect.
"I don't see much of a difference," she said. Joking, she added, "The problem
with the ethanol plant is it's too efficient. They don't hire enough people."
Indeed, Iowa State University professor David Swenson published a study
last year saying the renewable fuels industry is overstating the impact. What jobs
are indirectly being created — bankers, lawyers and electricians — aren't
accruing to tiny farm towns like Coon Rapids. They're instead going to larger
regional hubs like Carroll, the county seat, Des Moines and Omaha, he said.
"The big issue we have with our rural areas is the absolute absence of young
adults age 25 to 39 — the kind of people you count on to staff and sustain
industrial growth," he said. "It hamstrings their ability to create any economic
growth."
What's more, by doubling down on corn, towns like Coon Rapids are becoming
more dependent on two unrelated and volatile commodities — corn and crude oil.
Robert Gramling, a professor at the University of Louisiana at Lafayette, sees
parallels with the rapid rise of the ethanol industry in Iowa and the offshore oil
boom in coastal Louisiana a generation ago.
"My real concern is that the state and a bunch of small towns are going to get a
couple of years down the road and this thing is going to go belly up," said
Gramling, who spoke in the spring at a conference on the economic impact of the
ethanol industry at Iowa State University.
MOVE TO TOURISM
Local officials say they, too, see danger in becoming more dependent on corn
and agriculture. It's a reason they've been working for years to reinvent Coon
Rapids as an eco-tourism hub for western Iowa. In 2005, Gov. Tom Vilsack
named Coon Rapids one of the "Great Places."
There are plans to transform an old Garst Seed building into an artisan center
with condos and public space. And the main highway entrance to Coon Rapids is
getting a makeover that will feature the most significant public art installation
between Omaha and Des Moines.
The Coon Rapids Development Corp. is trying to get a motel built. And the Garst
family in 2005 established the White Rock Conservancy, donating more than
5,000 acres along eight miles of the middle Raccoon River to help preserve
habitat and wildlife.
Charles Carpenter, head of the local economic development group, is hopeful
that whatever gains are to be had from the Iowa ethanol boom, they can help
Coon Rapids realize a different, more sustainable, future that's not as dependent
on corn.
If Coon Rapids is to reverse the decline seen in recent decades, "it won't be
ethanol that will do it," Carpenter said. "It will be reinventing ourselves as a
center for tourism."
jtomich@post-dispatch.com | 314-340-8320
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