If you are involved in agriculture, you know the sector is not immune to the up-and-down cycles of the marketplace. Domestic and global market demands, weather, public policy decisions and the political environment are but a few of the variables that can impact a producer’s bottom line. That is why there is great value in the cooperative model for agricultural producers. The processing of members’ corn adds significant value to their crop.
In 1994 the ethanol industry in the United States was producing approximately one billion gallons of ethanol per year. Fuel ethanol was a niche market at that time, finding its way into local markets. It was not in use much outside the Midwest and the total volume of ethanol being used amounted to less than 1 percent of the nation’s gasoline demand.
Fast forward to today and you find that domestic use of ethanol in our gasoline supply is at that 10 percent level. That means that practically every gallon of gasoline sold in the United States is a 10 percent blend with ethanol. Our current gasoline demand in the United States is approximately 138 billion gallons per year. That creates a domestic demand for ethanol of roughly 13.8 billion gallons. The constructed capacity of the conventional ethanol industry in the United States is 15.5 billion gallons, and growing.
By the time 2017 rolls around, it is likely that the ethanol industry will have a constructed capacity in excess of 17 billion gallons per year.
We have just come out of one of the most profitable period in ethanol’s history. Debt is down, lenders are a bit friendlier, and management and boards have matured and learned. We have also come through a couple of periods of consolidation of ownership, so the industry is currently in fewer hands. This means a previous decision to expand capacity would affect only one facility where today that could be five, ten, or more.
That is why there is great value in owning ethanol plants for agricultural producers. Domestic and global market demands, weather, public policy decisions and the political environment are but a few of the variables that can impact a producer’s bottom line.
Furthermore, the added value produced by ethanol plants is of definite benefit to the customer-owners of the organization and the local community benefits when farmers spend the money on goods and services.
Al-Corn Clean Fuel, a farmer-owned ethanol production cooperative located in Claremont, MN, is one such example. Since its founding in 1994 with an initial membership base of 50, the cooperative now has approximately 470 members who recognize the value of diversifying their operation.
The cooperative was created when depressed corn prices drove local farmers to seek new opportunities to add value to their corn crop. Similar to other agricultural cooperatives, members of Al-Corn Clean Fuel invest financially but also agree to deliver a quantity of corn determined by their investment in the business. This “corn commitment” has been a key contributor to success of the cooperative.
For the past two decades, Al-Corn Clean Fuel’s model has allowed for development of a firm business foundation based on success, a strong cash position and investments that add value for members and their communities and resulted in competitive returns.
The Claremont plant was designed to produce 10 million gallons per year, which meant that our production equaled approximately 1 percent of the total U. S. ethanol volume going to market. As our industry has grown and evolved, however, Al-Corn Clean Fuel has been an active participant in finding ways to increase domestic demand.
Not only has Al-Corn Clean Fuel grown its capacity at the Claremont facility, it has added additional capacity via wise investments in other ethanol facilities. At present those outside investments are generating as much as 40% of the cooperative’s total net annual income.
In addition to the 17.5 million bushels of corn that are ground and 50 million gallons of ethanol that are produced annually, the cooperatives revenue stream for member-owners extends beyond the corn field via the marketing of co-products.
The Claremont plant produces 132,000 tons of high protein livestock feed, 12 million pounds of corn oil and 70,000 tons of beverage grade carbon dioxide. The majority of these products are consumed by refiners, livestock feeders, meat packers and biodiesel producers throughout Minnesota.
Al-Corn Clean Fuel continues to utilize the best available control technologies in order to reduce energy consumption and production costs while at the same time increasing efficiencies and reducing emissions.
In addition, the Claremont plant has reduced water consumption to less than 2.4 gallons of water per gallon of ethanol and was the first plant to achieve “zero liquid discharge”. In addition, energy conservation efforts have reduced the plant’s energy use by more than 35% compared to the original plant design.
Al-Corn Clean Fuel continues to play an important role in the economic viability of agriculture and rural communities throughout the region. The cooperative remains sound as it continues to successfully add value to the corn delivered by its member-owners, as well as seeking new and innovative ways to enhance revenue and reduce costs.
For additional information regarding Al-Corn Clean Fuel, please contact Randall Doyal at RDoyal@al-corn.com or visit al-corn.com.