Iowa Public Television


Ethanol Production Grows

posted on September 17, 2004

The rising popularity of ethanol is not unique to the United States. The ethanol market in Brazil is growing by leaps and bounds ... and observers say Brazilian ethanol exports coming off the 2004-2005 harvest will be three times higher than the previous year's totals.

Officials attribute the rise in exports to rising world petroleum prices ... and harvest declines in India that forced that country to import ethanol.

The growth in ethanol production in the U.S. has been equally phenomenal. That's especially true in Minnesota, where co-ops manufacture much of the grain-based fuel. The high productivity is due in part to State of Minnesota incentives ... and also to the entrepreneurial spirit of farmer cooperatives that understand the profit potentials. David Miller explains.


Ethanol Production Grows

Dale Tolifson is a grain farmer and chairman of the board for the Chippewa Valley Agrafuels Cooperative in Benson, Minnesota. Tolifson is so committed to the creation of ethanol 3/4 of the corn he and his brother grow goes to the Chippewa Valley Ethanol Company, the co-op's investor owned ethanol processing plant.

Dale Tolifson, Chippewa Valley Agrafuels Cooperative: "So, we went in there with a little bit of an attitude, well, I think it will work but we really don't know. But it was a tough decision whether we should go into it or not and as it turned out it was a very good decision."

To become part of the operation, a minimum 5000 share purchase was required. To date, 11 million shares have been sold and several thousand of those are available for purchase through a company stock exchange. Shares purchased at $2 are now being offered for sale at between $3 and $4. Each share is a commitment to bring one bushel of grain to the cooperatives doors.

In 2003, the Minnesota Legislature passed a law that all gasoline sold in Minnesota be required to contain 10 percent ethanol. The move would appear to have created a ready made market for producers. Even so, Chippewa Valley members are concerned about the possibility of an overabundance of ethanol being available for sale. Bill Lee is General Manager of the Chippewa Valley Ethanol Company and chairman of the board for the Renewable Fuels Association.

Bill Lee, Chippewa Valley Ethanol Company: "What is a little different here is we're selling ethanol into a gasoline system that is much, much huger than our supply and it has show tremendous ability to absorb a lot of more ethanol and I see that continuing for some time."

One of the advantages to becoming a part of ventures like Chippewa Valley is the increase in income gained by taking grain to an ethanol plant instead of delivering it to an elevator. Members receive an eight cent per bushel premium over market price and the average payment is now $2.61 per bushel. Recently, shareholders were paid a 50-cent a bushel dividend. Part of the dividend was made possible through the sale of co-products produced by the fermentation process like distillers dried grains and solubles, or DDGS. Chippewa Valley sells 11,500 tons of DDGS each month as animal feed to in a 30-mile radius of the plant.

In addition, some of the alcohol is being sold as an industrial solvent and a small amount of wheat, rye, and rose petals have been fermented for Infinite Spirits line of Shakers vodkas.

But one of the more significant moves is the distribution of E85, a fuel blend that is 85% ethanol, to 20 gas stations in the area. Though it can only be used in Flexible Fuel Vehicles, or FFV's, there is a significant price and environmental advantage to using this specialized mixture.

Tolifson owns an FFV, one of approximately four million on the road today, and plans to keep the fuel in the tanks on his property. Though he has experienced a two-mile per gallon drop in fuel efficiency, his pick-up truck has not shown any loss of performance.

Sales of all the E85 produced in Minnesota passed the two million gallon mark in 2003 and three million gallons does not appear to be out of the question for 2004. The increase in use of the special blend has been aided by a combination of federal grants and the work of several grass roots groups like the American Lung Association of Minnesota. Tim Gerlach is in charge of Outdoor Air Programs for the group. <

Tim Gerlach, American Lung Association of Minnesota: "Well, initially in 1998 when we started when the E85 team in the state, the pilot market began it was very difficult. Primarily, retailers had never heard of E85, there were not that many vehicles or potential users on the road, which was a tough sell. And when we went into visit with a station we had to offer to purchase all of the equipment, install the equipment at their station. However, now I believe retailers, service stations are beginning to see the potential. There are a lot of vehicles on the road, more and more every year, they're starting to see their competitor down the street starting to sell some fuel and make some money at it."

The efforts of the Lung Association and other affiliated organizations have spawned the largest concentration of E85 pumps in the United States at close to 100.

For consumers, the pollution-reduction benefits are not as visible as the price at the pump. In the Twin Cities suburb of Egan, Minnesota, gas wars have reduced the normal price break of five to 25 cents below the lowest E10 grade to only a penny. But in Benson, a gallon of E85 runs almost 20 cents less per gallon.

Industry observer groups, like the Minneapolis- based Institute for Local Self-Reliance, see the highest payback from ethanol production in what it does for the community surrounding the plant. David Morris is vice-president of the ILSR.

David Morris, VP ILSR: " me, ownership matters and the problem with the ethanol policy of the country right now is that to them only production matters. So, they want to get more and more ethanol produced and I do too but if the ethanol produced is produced by large absentee owned plants it really isn't going to help the farmer."

And Lee would agree that the investment is worth the risk.

Bill Lee, Chippewa Valley Ethanol: "...most of the conventional wisdom right now is we seem to be in an era where we're not going to go back to inexpensive energy anytime real soon. And so that would tend to say the people who put their -- took a little bit of a risk in this form of renewable energy maybe made a good move."

For Market to Market, I'm David Miller.


Tags: agriculture biofuels corn ethanol Minnesota news renewable fuels