Indiana’s ethanol boom not a bust
Prior to 2007, Indiana was lagging behind some other Corn Belt states in joining the ethanol party, with only one plant, South Bend’s New Energy, which was built in 1984. Although plans for as many as 41 plants were announced, when the talking was done, 12 new plants were actually built.
That gives Indiana a total of 13 plants operating today, notes Chris Hurt, a Purdue University Extension ag economist. He charted the rise and fall of the ethanol frenzy as best as he could. The baker’s-dozen count doesn’t include Grain Processing Corp., a diversified corn products facility in Washington. It produces some ethanol for beverage and industrial use.
The plants that were actually built started coming on line in 2007, Hurt says. Two of them went belly-up as the ethanol industry struggled during 2008, with the overproduction created by the gold rush to build new plants across the country. The plant at Linden, for example, originally built by VeraSun, was closed when its parent company went bankrupt. It was later acquired by Valero Energy.
• Indiana entered the ethanol game at same time other factors increased demand.
• Less than one in three of all rumored plants were ever built.
• Of the 13 plants operating today in Indiana, 12 were built in past five years.
The plant at Cloverdale has a long history. Economic growth committees proposed the plant, plus another plant that never got off the drawing board. The second plant was to specialize in producing industrial products, not just fuel-grade ethanol.
The Cloverdale plant operating today was originally built by AltraBiofuels. Closed for a while, it was recently acquired and reopened by Poet. This company operates other plants within Indiana. Ownership has also changed hands for some of the other plants in the state.
The impetus to build ethanol plants inside state borders was spurred when it became a goal of the fledgling Indiana State Department of Agriculture in 2005. One of ISDA’s goals was to promote ethanol production.
Indiana is now the fifth-largest ethanol-producing state in the nation, paralleling its position as the fifth-largest corn producer. Currently, an estimated 380 million bushels of corn go to ethanol plants annually, Hurt says. That’s about 40% of Indiana’s corn crop.
While the Energy Independence and Security Act of 2007 at the federal level indicated big things were coming, Hurt says the impact wound up being bigger than anyone back then could have foreseen.
U.S. ethanol picture
Unforeseen factors helped fuel the ethanol frenzy, Hurt believes. “The impact of ethanol alone wouldn’t have been nearly as big as it turned out to be,” he says. “But nobody anticipated that the Chinese would start buying soybeans so aggressively at the same time, thanks in no small part to the relatively low value of the dollar.”
The combination created a perfect storm that changed the whole equation, he adds. “It would have been no surprise that corn ethanol by itself might have given us $4- to $4.50-per-bushel corn. The surprise is that with soybean exports increasing so dramatically at the same time, we’ve now seen $7 and even $8 corn.”
Those prices have now backed off somewhat, due to other factors, primarily concerns about the global economy. At the same time, the Energy Act calls for increased use of ethanol over the next few years. And the Chinese have aggressively pursued buying dried distillers grains with solubles, or DDGS, a byproduct of ethanol production, Hurt observes.
Basis benefactor: Mike Shuter and other crop farmers near ethanol plants benefit from an improved basis compared to the days before the plants were built.
Tough road: Randy Curless and his hop operation have traveled an up-and-down road as corn prices increased, strengthened by ethanol, before hog prices climbed.
This article published in the February, 2012 edition of INDIANA PRAIRIE FARMER.
All rights reserved. Copyright Farm Progress Cos. 2012.