Value Added Agriculture Program
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
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Value Added Agriculture Program
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 coproduct handling/marketing.
Measure impacts of growth on the ethanol
industry and on its input supply chain.
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Value Added Agriculture Program
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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Value Added Agriculture Program
Production and Corn Usage
n
Ethanol
Produced
mil gal/yr
Corn Used
mil bu/yr
DGS
000 tons/yr
23
1448.0
514.3*
4386.6
Plants, expansions
16
under construction
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
Summary
Statistics
Current Dry-grind
Plants
Subtotal
Announced
Total
4569.5
33
2975.0
7544.5
1614.3
1062.5
2676.8
*Operating at actual capacity, approximately 5-10% over rated capacity.
**Plants in bordering counties of other states with 50% use assigned to Iowa corn.
13736.6
9031.3
22752.7
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Value Added Agriculture Program
Corn consumption and storage
Current capacity*
(mil gal)
Minimum
Maximum
24.0
120.0
Corn Usage*
(million bu)
8.6
42.9
Average
64.6
22.4
Std. Dev.
27.6
10.1
Sum
1,448.0
516.1
Corn Storage*
(thousand bu)
220
5,500
1,214
1,108
27,920
19,420**
Corn Percent*
(storage/usage)
1.87 %
59.23 %
7.79 %
(4.38%)**
12.54 %
n/a
*Represents 23 dry-grind plants in 2006
**Without two “high storage” plants
Distillers Grains storage
2.62%
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Value Added Agriculture Program
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
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Source: Robert Wisner, Dept. of Economics, Iowa State University
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Value Added Agriculture Program
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% max
Producers 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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Value Added Agriculture Program
Grain Storage and Management Practices Training Model
Grain Storage Challenges --- Supplying the Ethanol Industry
Farm
No
Temporary
Build
Ethanol
Plant
Elevator
Commercial
Yes
Store
Commercial
Conventional
Conventional
Condominium
7 to 14 Days
Sell
No
Yes
How much needed
Kind of capacity
Kind of drying
How
Meets delivery cycle
GEAPS 520 Training
Build new
How much needed
Kind of capacity
Kind of drying
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Value Added Agriculture Program
• Grain storage and management practices
– Farm
– Elevator
– Ethanol plant
• Follow the link to storage and management
questions.
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Value Added Agriculture Program
•
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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Value Added Agriculture Program
Transportation: Ethanol shipments
By Truck
34.7%
Ethanol shipments by Rail and Truck
120
Truck
100
% Ethanol shipped
By Rail
65.3%
Rail
80
60
40
20
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Ethanol Plants
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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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Value Added Agriculture Program
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 shipments
Distillers Grains Shipped by Rail and Truck
By Truck
44.4%
100
% of DG shipped
By Rail
55.6%
120
80
Truck
60
Rail
40
20
0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20
Ethanol Plants
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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
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
Source: Iowa Beef Center, Iowa State University
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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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Value Added Agriculture Program
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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Value Added Agriculture Program
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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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 CO2.
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Value Added Agriculture Program
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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Value Added Agriculture Program
Acknowledgements
• Iowa Grain Quality Initiative
• www.iowagrain.org
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Contact information
Iowa State University Extension
Value Added Agriculture Program
www.iavaap.org or www.agmrc.org
Connie Hardy
Mary Holz-Clause
Iowa Grain Quality Initiative
www.iowagrain.org
Howard Shepherd
Charles Hurburgh
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Value Added Agriculture Program
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