David Kolsrud, a corn and soybean farmer from Luverne, Minn., says the “bigger is better” attitude that has driven most farm management decisions for the past few years, taken to it's ultimate conclusion, will result in two farmers left in the country, one east of the Mississippi River and one west.

“They'll only need one county agent between them,” he quipped during the recent Blacklands Income Growth Conference and Expo in Waco, Texas.

To make certain that more than two farmers survive the current economic horror, Kolsrud recommended that producers assume more control over their products.

“We have to move further up the food chain,” he said. “We have to get into processing.”

Ethanol offers an ideal opportunity for farmers to manage grain products through processing and distribution to end-users.

“The incentive for producers is a 20 cents per gallon return on up to 15 million gallons a year for the next 10 years,” he said.

The Clean Air Act and recently passed oxygenated fuel statutes add impetus to an already growing industry. “Demand will double in the next five years,” Kolsrud said. “The big question is who will own the plants, farmers or conglomerates.”

He said it makes sense for farmers to join together to build and manage ethanol plants. “We have 13 plants in Minnesota and only one is not farmer-owned. The Minnesota legislature helped with incentives and discovered that every $1 spent on the program netted the state $12 in income.”

Demand gets a boost from a Minnesota law requiring that 10 percent of every gallon of gasoline sold in the states is ethanol.

Kolsrud iss associated with Agri-Energy, LLC, a production plant in Luverne. “We produce 20 million gallons of ethanol, $30 million worth a year,” he said. A by-product, distiller's grain, provides an excellent livestock feed and increases the value of a kernel of corn.

“We do not capture the carbon dioxide, but that also can be caught and used to add fizz to sodas. We use one-third of the corn kernel for ethanol and one-third for feed.”

He said the county produces 11 million bushels of corn a year for export and uses other than feed. With grain prices at $1.60 to $1.70 per bushel, ethanol makes more sense than exports with a $3.72 per gallon price.

“Ethanol adds about $12 million to the county's economy,” Kolsrud said.

It's sound business. “Farmers transfer an agricultural product currently in over-supply into a fuel product that is not. It helps with our fuel demand and helps support our livestock industry.”

Currently he said, 54 plants operate nationwide with another 80 set to go on line in the next few years.

“But plants are becoming saturated with industry and that's not as beneficial for farmers. If farmers own the ethanol plants they invest in themselves.”

Joe Cox, chief of staff for Texas state Rep. David Swinford, said the state legislature is “interested in ethanol. It's a value-added product and helps with energy security.”

Cox said the United States currently imports 57 percent of its energy needs. “That will soon hit 60 percent. With bio-fuel, we can become more energy independent.”

He said the “issue is gaining momentum throughout the country, especially after September 11.”

He said no regulation in Texas requires that ethanol make up a certain percentage of all gasoline. “But demand is growing. The potential includes a 270 million gallon per year consumption for the Dallas and Houston areas.”

Texas MTBE producers (an oxygenation additive) “will fight ethanol and the MTBE ban,” he said.

Cox aid recently approved Agricultural Development Districts, which provide tax incentives for farmers who develop value-added processing sites, could stimulate interest in farmer-owned ethanol plants.

Milam County, Texas, farmer Kent Worley said ethanol production is not particularly complicated.

“It can be done. Demand is growing, but we need help to get started. Central Texas could supply part of the demand.”

rsmith@primediabusiness.com