When he’s working on his farm, Jim Casey often glances at the ethanol plant looming over the prairie a half-mile away. “You know you’re making money when you see that smoke coming out of the stack,” he says.
Ethanol plants are changing farming across the Midwest. The last time there was such a dramatic shift in agriculture was “when electricity came to the rural people” in the 1930s and ’40s, says Dave Hughes, president of the township board and a farmer who invested in the plant.
Casey bought his shares in the ethanol biorefinery for $1,000 each three years ago. They’re now worth almost $4,000 each. Like the other 950 shareholders in the cooperative, he has gotten $400 in dividends for each share since the plant opened in April 2005.
That’s not the only way his bottom line is being helped. Casey is selling part of his corn crop this fall to the plant for 17 cents a bushel more than he was offered elsewhere. He also saves fuel when he hauls his corn just down the road instead of trucking it to an elevator miles away. Because of the plant’s proximity, the value of his land has increased. “When I get old, that’ll be pretty nice,” he says.
The United Wisconsin Grain Producers plant here employs 36 people, all but two of them from the area. Hourly workers make about $35,000 a year and get profit sharing, incentive pay and full benefits, CEO Jeff Robertson says.
Rising gas prices and the push for less dependence on foreign oil have increased demand for ethanol, which is made by converting the starch in corn into sugars that are fermented and distilled. When it’s blended with gasoline, ethanol can reduce carbon monoxide emissions. Legislation signed by President Bush last year added urgency: It requires oil refiners to use 4 billion gallons of renewable fuel this year and 7.5 billion gallons by 2012.
Those factors have created a rapidly expanding industry that is centered in the rural Midwest.
There are 105 ethanol plants in operation; almost half are owned by local farmers, according to the Renewable Fuels Association, an industry group. Forty-one more are under construction, and seven are expanding. Capacity is 5 billion gallons a year. When the new plants are running, that number will grow to 7.9 billion.
Many small ethanol producers qualify for federal and state tax credits and loan guarantees.
“I think the boom will continue,” says Bob Dinneen, president of the Renewable Fuels Association. “The nation needs to have more domestic renewable energy, and ethanol is going to satisfy a big part of that. … Farmers ought to be re-evaluating what they are planting and responding to the market signals.”
That’s happening here.
Before the plant opened, Casey planted corn on two-thirds of his 1,500 acres and soybeans on the rest. This year, he moved 20% of his soybean acreage into corn.
Even though it can cost more to grow corn than soybeans because of the cost of fertilizer, Hughes also has shifted more of his 740 acres into corn. The plant, he says, “has changed a lot of things. A lot, and they’re all positive.” Some area farmers who didn’t invest in the plant, Hughes says, “are kicking themselves in the fanny.”
Friesland’s 303 residents have embraced the plant, but not every town is as welcoming. Before settling on the site just off state Highway 33 here, organizers considered locating in Arlington, says Bill Herrmann, president of the United Wisconsin Grain Producers’ board. The concerns of residents there about noise, odor and possible effects on a bird sanctuary prompted them to drop those plans.
Bruce Braaksma, owner of Royal Lumber here, says the plant isn’t much of a nuisance. The 100 or so trucks that enter the plant daily don’t usually go through town, he says. “If it’s dead still, you can hear just a little bit of a hum, and the wind has to be just right to smell it. It smells like an old tavern,” he says.
Besides, Braaksma says, most people in town have been won over by a decline in property taxes since the plant was built. “When your property taxes go down $200 to $300, everybody’s got a smile on their face,” he says.
The plant produces about 50 million gallons of ethanol a year. An expansion that will increase production to 80 million by the end of 2007 is underway. “The profitability of the company is such that this is happening earlier than anybody planned,” Robertson says.
“The presence of an ethanol plant really does ripple through the entire economy,” says Geoff Cooper, ethanol analyst at the National Corn Growers Association. “With the current rate of growth that we’re seeing, that’s going to continue for the next several years.”
There are some doubts that alternative fuels can end the country’s dependence on foreign oil.
For years, studies showed that more energy is required to produce ethanol than is saved when it’s used in gasoline. A University of Minnesota study released in July concluded that ethanol and biodiesel made from soybeans return more energy than is consumed in growing the grains and distilling them into fuel.
The study estimated that using all corn and soybeans grown in the USA for ethanol and biodiesel would offset only 12% of gasoline demand and 6% of diesel demand. In 2005, the U.S. Agriculture Department says, ethanol accounted for about 3% of the nation’s gasoline consumption.
Ray Defenbaugh, president of Big River Resources, a farmer-owned ethanol plant in West Burlington, Iowa, says weaning the nation from foreign oil is important, but his priorities are closer to home.
“We want to create jobs for youth, preserve the community and provide a good return to the investor. The money we make goes right back into the community,” he says. “That’s the reason we built it.”
Casey says his goal is to help himself and other farmers: “It’s more about the end product for ourselves, to have a place to sell our corn, so we can stay in business.”