Ethanol Provides a Bright Spot in Dismal Ag Picture

  • Monday, 28 November 2016 14:02

Journal Advocate

November 28, 2016

By Jeff Rice

There aren't many bright spots in agriculture these days; most experts agree it will be at least 2018 before commodities prices turn around, and even then it will be slow and sporadic. But there is one light of hope, a beacon that glows brightly at the east edge of Sterling and helps provide a little more price stability than would otherwise exist.

Mark Sponsler, executive director of Colorado Corn Growers Association, told the Journal-Advocate a week ago he believes the price of corn would be a dollar a bushel lower if not for the demand for ethanol, and he credited ethanol producers with providing long-term stability for corn prices.

Dave Kramer is flattered by Sponsler's assessment, but says the effect is a little inflated. "I'd say it's about half that, if even that much. Maybe 40 cents a bushel," he said.

Kramer is CEO and founder of Sterling Ethanol LLC, which has plants in Sterling and Yuma, and in Bridgeport, Neb. And if Kramer seems overly modest about his industry's impact on corn prices, he's perfectly willing to accept credit when credit is due. After all, the Sterling-based plants provide more than three-fourths of the ethanol used in the gasoline sold in Colorado and surrounding areas. Anyone who has been stuck in traffic on southbound I-25 in Denver on a Monday morning can quickly figure out, that's a lot of ethanol.

Most people know ethyl alcohol most intimately as the stuff that makes us funnier, better-looking, smarter, and generally more likeable when imbibed in moderate quantities. But its value as an internal combustion fuel has been recognized since the invention of the internal combustion engine. More recently, it was recognized as an additive to help those engines burn cleaner, but large-scale production was more expensive than the other additives.

The nascent ethanol industry bloomed suddenly after the implementation of the Energy Policy Act of 2005. But while the provisions of the legislation had mostly to do with subsidizing and incentivizing energy production, including alternative energy sources, Dave Kramer saw the opportunities a little differently. After a couple of decades in the livestock feed business, Kramer's employer was bought out by a competitor, and he suddenly found his employment options to be, as they say, limitless.

"I got investors together from the corn and cattle industries and from other related areas, and we approached this as a feed mill that produces ethanol," Kramer said. "The wet distiller's grain that we produce is easier for cattle to process."

According to Kramer's figures, feed corn normally contains about 12 percent protein and 4 percent fat. But when it's ground and processed to produce ethanol, the distiller's grain contains about 33 percent protein and 10 percent fat. All that's taken out is the starch, which cattle don't use anyway. The result is cattle feeders paying less for the corn they can feed.

"We estimate that (distiller's grain) reduces the cost of cattle feeding by anywhere from five to 10 cents per pound of gain," Kramer said. When you consider that weight gain over the feedyard life of an average beef animal is about 92 cents per pound (according to the University of Arkansas) even a nickel a pound is a respectable savings.

One reason the distiller's grain from Sterling Ethanol's plants is so economical is that the plants are what Kramer calls "origin and destination" facilities. An origin plant, he explained, is one that takes in corn from local sources and then ships the ethanol and dried feed product to distant customers; a destination plant takes in corn from distant sources and sells the products locally.

"We're a combination of those," Kramer said. "We take in corn from local sources in Colorado and Nebraska, and we sell the products locally in Colorado and Wyoming."

Because the feed product is used locally, there's no need to dry it before shipping, which saves the considerable energy costs of drying the product. That means less energy used by the plant resulting in a lower cost for the feed.

And speaking of saving energy, the Sterling plants produce some of their own electricity from waste steam. Each of the three distilleries has its own steam turbine, which produces about a megawatt of electricity to be used in the plant. It saves about $60,000 a month in operating costs.

"We have the lowest carbon scores of any ethanol plants in the U.S.," Kramer said.

And then, of course, there's all that ethanol. After all, Kramer's investors saw their opportunity to build a state-of-the-art feed mill come from a piece of legislation that was meant to spur energy independence in the United States.

Part of that legislation is an incentive to goose production of a replacement for methyl tert-butyl ether (MTBE), a fuel additive that prevents engine knock and lowers harmful exhaust emissions from internal combustion engines. And while the billions of dollars in tax incentives and outright subsidies did give the industry a bit of a boost, it was not one the Sterling company took advantage of. In only seven months, Sterling Ethanol's investors had the $52 million plant up and running. And while Kramer is reluctant to divulge hard numbers on the company's finances, he does say that it is profitable and looks to stay that way for a very long time.

Sterling Ethanol turns 51 million bushels of corn into 165 million gallons of ethanol in its three plants each year. With the 48 million gallons produced by the plant owned by Front Range Energy in Windsor, that's enough to supply the gasoline blending stations in Denver, Cheyenne, and Colorado Springs. In other words, virtually all of the ethanol burned in Colorado is from Colorado, and most of it is from Sterling Ethanol plants.

While they're at it, the company employs 26 full-time people and pumps about $2 million in paychecks into the local economies.

As good as all of that is, however, there's bound to be a down side to ethanol, isn't there?

Well, yes ... or rather, there might have been.

At one time.

But not really.

Read the original story: Ethanol Provides a Bright Spot in Dismal Ag Picture