A new ethanol production plant expected to be on line early next year in Plainview, Texas, could consume as much as 36 million bushels of grain (corn or milo) annually to produce 100 million gallons of renewable fuel.
Most of that grain will come in from the Midwest, says Mike Harder, manager of the White Energy facility in Plainview.
Even with most of the raw material coming from outside the High Plains, he sees opportunity for corn and grain sorghum producers. “We anticipate opportunities for local grain sales,” Harder says. “Ethanol production creates demand and rewards supply.” And that could move prices upward on boards of trade.
Harder says bringing an ethanol plant into the Texas High Plains also benefits area cattle and dairy operations.
“The grain supply does not completely disappear from the food chain,” he says. “For every three bushels of grain we put into ethanol production, we get one bushel back in the form of distillers grain. Livestock feeders want it.”
That distillers grain co-product is one reason ethanol plants make sense in grain deficit areas.
“We have a freight advantage over the Midwest to move ethanol into the South and the Southwest,” Harder says. “And we have a co-product where we have demand, where the cattle are. We don't have to dry the wet distillers grain and there are no freight costs to get it to end-users.
“We don't have to ship it across two regions. We also don't have to pay drying charges.”
When shipped out of an area, someone has to dry distillers grain for shipment. “That means a natural gas charge on top of freight rates,” Harder says. “The by-product demand is one reason ethanol production makes sense in a grain deficit area.”
He expects ethanol markets to include California, Arizona and high population areas in Texas.
“When rail infrastructure is built, we'll ship by rail,” he says. “Rail will be more economical and we'll be able to ship in large units.”
White Energy already has a modern rail facility in place and will upgrade that for ethanol. “We'll handle grain in from the Midwest and ethanol going out,” Harder says. The Scoular Co. will originate the grain and market the distillers grain.
“White Energy is a Dallas-based company focused on renewable energy,” Harder says. “We also are building an ethanol plant in Hereford.”
He says the future of the grain industry has changed. “Mechanization helped change the industry in the 1950s. In the 1960s and '70s, fuel increases especially during the oil crisis of 1973, created more change.”
He said technology with seed and chemistry precipitated the next change.
“Now we have a new landscape, with change again driven by fuel prices, that makes renewable fuels the new paradigm.”
Harder says the Texas Panhandle could produce from 500 million gallons to 600 million gallons of ethanol annually. “And Texas is not yet a real player in the ethanol industry.”
Ethanol may dictate some adjustment in crop acreage, he says.
“We've always been a grain deficit area. But corn acreage has dropped some because of production costs (mostly for water) compared to cotton. At one time, we were about half and half corn and cotton.”
Better grain prices will swing some acreage back to corn or grain sorghum.
National Sorghum Producers CEO Tim Lust says Texas Panhandle producers and elevator managers are calling their Lubbock office to get information about the best grain sorghum varieties to plant. “We're hearing from producers that they're going to start planting more grain sorghum again.”
Lust says ethanol demand is contributing to the high prices. “In the Sorghum Belt, which stretches from the Rockies to the Mississippi and from South Texas to South Dakota, 10 plants have been funded or have started construction. Seven more have been announced for a total of 17 plants.”
He says the 30-million-gallon ethanol plant operated by Abengoa Bioenergy at Portales, N.M., uses almost all grain sorghum when there is supply is adequate.
“Sorghum makes a lot of sense for ethanol production in the Southwest because it not only yields the same amount of ethanol per bushel as corn, but it is also water-efficient.
“In Kansas, ethanol plants have routinely used sorghum and corn interchangeably and we have been working to ensure that the same thing happens with the new destination plants coming online.”
David Gibson, executive director, Texas Corn Producers Board, says more than 97 plants currently produce more than 4 billion gallons of ethanol annually across the country. That's up from just over 1 billion in 2000.
“We need increased grain production from our next Texas crop,” Gibson says, to meet the 2007 anticipated demand of more than 7 billion gallons. “By 2008, we'll need 3 billion bushels of corn or grain sorghum to meet ethanol demand,” he says. Rains in late fall and early winter have most farms in good shape for the 2007 planting season.
Demand for grain, he says, is pushing up price. “We're excited about the possibilities.”