Archive for March, 2011

Floods are possible in southern MN in the next week; MDA advises preparation and planning

Written by Jonathan Eisenthal

Flooding is a distinct possibility in southern Minnesota in the next week, according to the latest hydrologic forecasts from the National Weather Service. Minnesota Department of Agriculture has sent out advisories to remind farmers and agriculture related businesses of the information and the host of services available to help deal with flood preparation, or with damage and clean up in the aftermath of flooding.

“Now is the time, if you need to sandbag or dike bins and other facilities on the farm to make sure floodwater doesn’t cause damage,” said Greg Schwarz, a farmer in Le Sueur and president of Minnesota Corn Growers Association. “If you need to move grain to different facilities, you have to leave adequate time — you may have to take longer routes with spring road restrictions coming into effect. Rising floodwater could also close bridges and other roadways this year so it’s good to get a jump on this.”

MDA has published a number of fact sheets to help farm operators plan for the protection of seed, inputs and equipment. Other fact sheets provide information about financial and advisory services applicable before and after flooding takes place. These fact sheets can be found at http://www.mda.state.mn.us/en/protecting/floodinfo.aspx

The latest flood information for your area can be found at the Minnesota Enhanced Flood Forecast/Warning System website:
http://www.dnr.state.mn.us/waters/surfacewater_section/stream_hydro/floodwarning.html

“Appreciable rises (are expected) on the Cottonwood and Redwood Rivers, on the Minnesota River between Mankato and Henderson, South Fork of the Crow and Crow Rivers–flood stage could be experienced as early as this weekend and into next week on these rivers,” according to the March 17 report from the Advanced Hydrologic Prediction Service (National Weather Service).

These flood forecasts have been made possible through the installation of 38 advanced stream gages around the state, as well as significant upgrades to five existing gages monitored by the US Geologic Survey.

The forecast says cold air arriving in the coming week may avert flooding in the near term: “Models indicate a surge of cold air with the system on Tuesday and into Friday….likely that we will have a snow event…a more optimistic solution than a rain event as it will not immediately run off into the rivers.”

Though water levels are expected to rise on the Minnesota River downstream from Shakopee and on the Mississippi River south of Saint Paul, the National Weather Service states that “a great deal of uncertainty still exists in the timing and rate of rises…so forecasts are not yet available.”

The arrival of cold air and the possibility of further snow accumulation mean this may not be the final melt, the weather service said, adding that the state’s more northerly river systems will see slower rises due to the cold weather and there is no prediction of flooding in the near term for the Long Prairie, Sauk, Upper Mississippi, Eau Claire and Chippewa Rivers. The only exception among these systems is Fall Creek on the Eau Claire River, “which may approach flood stage,” the weather service said.

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Holding the Thin Green Line

(excerpt from an article “Agriculture will drive U.S. recovery” by former US House Agriculture Committee Chairman Larry Combest)

U.S. House Agriculture Committee Chairman Frank Lucas, R-Cheyenne, and retired general and NATO Commander Wesley Clark, a Democrat, have something in common. They see America’s farmers and ranchers as a “thin green line” that we must hold.

Both point to a Federal Reserve paper that says U.S. agriculture is driving economic recovery. Both underscore the role food plays in our national security. And both alert us to an ominous reality: Earth will hold 9 billion people within 40 years, many of whom will go hungry unless our farmers and ranchers double production.

Armed with these facts, one would think Washington would work overtime to promote a positive business environment in which American agriculture can unleash its full production potential.

Instead, as Lucas notes, there are no fewer than 10 new regulatory assaults being waged upon the American farmer and rancher today, threatening to bog down producers with higher costs, burdensome paperwork and legal uncertainty.

On energy policy, too, Washington continues to vacillate between inaction on one hand and contradictory policies on the other. Lawmakers should work toward a consistent, focused and ambitious agenda that uses every tool available to promote greater domestic production – which in the short run might help arrest today’s spiking energy costs that hit American agriculture hard, and in the long run promotes our energy independence from thugs like Moammar Gadhafi and Hugo Chavez.

Our Take:
Energy and Agriculture policies need to work in concert–the right combination will support American farmers’ ability to feed the world while gaining American energy independence and ethanol plays a key part in this that is not well understood. Except by crop farmers. They know that farm-based energy production has been the most successful program ever for strengthening the market for major crops.

A presentation by a Pro-Exporter analyst at the 2011 MN Ag EXPO pointed to the bottom-line truth: in order to feed the expected 9.2 billion people on earth in 2050, global agriculture must grow is productivity by 1.7 percent. Every year for the next 40 years. Our trend line has been 1.4 percent growth, he said. Even that won’t cut it. We need to kick it into even higher gear. He was optimistic on that note, and so are we. It can be done. But marshaling the resources of science, technology and production on every American farm means creating policies that support our farmers and support value-added agricultural enterprise like ethanol. It may be counterintuitive, but it is the energy market for corn that has spurred a great deal of the increased productivity. And let’s not forget that ethanol producers are also food producers. Experts calculate that the high protein-high oil feed product called distillers grains returns as much as 50 percent of the food value of the corn used to produce ethanol to the livestock industry. So as the ethanol has boomed, and farmers have been more productive, the amount of food produced through American farming has increased. With the kind of support Lucas and Clark are talking about, farmers can meet the 1.7 percent increase in productivity and provide a growing portion of our transportation fuel needs.

Grassley offers strong argument for continuing ethanol incentives/tariffs

Written by Jonathan Eisenthal

Senator Chuck Grassley (R-Iowa) made a very compelling argument for continuing incentives and tariffs in support of biofuels in America in a March 7 speech on the floor of the US Senate.

If the United States wants to free itself from dependency on foreign energy sources then the combined ethanol blenders tax credit and the tariff weighed against foreign ethanol are key elements in achieving that goal, he told his colleagues.

The Government Accountability Office recently identified the ethanol tax credit, officially known at the Volumetric Ethanol Excise Tax Credit (VEETC), as a wasteful duplication, and argued that the domestic production of ethanol is adequately encouraged by the requirement specified in the Energy Independence and Security Act (EISA). The 2007 law mandates 15 billion gallons of grain ethanol be blended in US gasoline supplies annually by 2015 and an additional 21 billion gallons of next generation biofuels by 2022.

Grassley refutes the GAO argument, saying the EISA law requires only that America use ethanol. Without the addition of the VEETC ($0.45 cents per gallon, set to expire at the end of this year) and the tariff ($0.54 cents per gallon of imported ethanol), he argues we will simply substitute an addiction to foreign ethanol for our current addiction to foreign oil.

For the time being, the incentive structure is what fosters the growth and continued strength of the domestic ethanol production industry.

“We are happy to hear about Senator Grassley’s strong support for ethanol,” said Greg Schwarz, a farmer in Le Sueur, Minnesota, and an investor in his local farmer-owned ethanol plant, Heartland Corn Products in Winthrop. “There are a lot of people who are arguing for change in the nation’s approach to supporting biofuels, especially in light of renewed calls to deal with the national deficit. In the midst of all this debate, it’s helpful to have a voice like Grassley’s delivering a clear message about the values and benefits of the current approach to biofuels. We’re supporting American farmers, American rural communities and making real progress in the quest for energy independence with this policy. About ten percent of the US transportation fuel supply comes from US produced ethanol–this is a key factor in moderating gasoline prices that are extremely volatile as uncertainty in the Middle East continues.”

Schwarz hopes that Grassley’s clear message attracts the support of others in the Senate and in the House of Representatives as well.

Grassley noted that in the past year, US ethanol producers made 13 billion gallons of fuel–which displaced 445 million barrels of crude oil from Saudi Arabia and other foreign sources. Ethanol represents the third largest segment of the American transportation fuel market–the only bigger sources are US crude oil production and Canadian Crude Oil production.

“By any measure this policy has been a huge success in achieving the goals of energy independence and national energy security,” said Schwarz. “Any proposals to change our biofuels policy will have to come up with some very compelling programs to do better than VEETC and the ethanol tariff.”

To see an excerpt of Grassley’s speech, reprinted in the DesMoines Register, go to

http://www.desmoinesregister.com/article/20110313/OPINION01/103130306/-1/SPORTS09/Grassley-Why-will-continue-fight-ethanol

Governors Ask for Improved Corn-for-Ethanol Reporting

(posted on 03/16/2011 by Hoosier Ag Today with Gary Truitt, at
http://www.hoosieragtoday.com/wire/news/00126_govinors_182918.php)

Thirty-four of the nation‘s governors would like USDA to alter the way it reports the use of corn for ethanol production. According to a letter to Ag Secretary Tom Vilsack – the monthly corn supply and demand reports downplay the growing importance of distillers grains to meet livestock feed demand and provides an inaccurate rhetorical weapon for ethanol opponents. Kansas Governor Sam Brownback and Minnesota Governor Mark Dayton – representing the Governor‘s Biofuels Coalition – write that by identifying corn demand for ethanol without immediately noting it as gross demand and not the net use of the starch portion of the corn kernel, “The report overstates the use of corn for ethanol by as much as a factor of two or more.”

National Corn Growers Association President Bart Schott agrees with the governors – stating that NCGA is proud of the role ethanol plays in creating jobs, improving the environment and growing energy independence and wants to ensure an accurate representation is made of the important work the nation‘s growers are doing to meet all needs – for feed, food and fuel.

According to Growth Energy Public Affairs Director Chris Thorne – more than a third of all corn that goes into ethanol production is returned to the food chain in the form of highly-valued, nutritious livestock feed that replaces a greater volume of field corn. He says the Governor‘s Biofuels Coalition is to be commended for pointing out that the way corn use is counted in the U.S. leaves a great deal on the table – uncounted – in the form of DDGs.

Our Take:
A big thank you to Mark Dayton and the other governors for taking up this issue that has been crying out for a resolution for some time.

It’s part of getting the story out that ethanol plants produce energy and food!

For every 56 pounds of corn in–a bushel as every farmer knows–the ethanol plant produces more than 17 pounds of high quality feed known as Distillers Grains.

By taking the starch out of the corn and making it into a protein and oil-rich feed it becomes, pound for pound a more efficient feed for cattle–like putting a cow on the South Beach diet. By taking starch out of the equation, beef and dairy cattle have far less incidence of acidosis–the technical term for stomach ache/heart burn. Not only does this make cattle more comfortable but it improves their efficiency in putting on weight.

Cattlemen report using rations of 55 percent distillers grains in order to maximize the benefit.

Until the USDA properly accounts for the animal feed produced by ethanol plants, it offers the public a distorted picture of grain disappearance for ethanol. With that corrected, all ethanol supporters can point to the change and make an even more forceful argument to ethanol critics that farm-based energy does not mean food versus fuel. It means Food AND Fuel!

We’re pulling for Heron Lake: Minn. plant has 60 days to raise $4.5 million in working capital

By Holly Jessen
Bob Ferguson, CEO of Heron Lake BioEnergy, a 50 MMgy ethanol plant in Heron Lake, Minn., is confident the company will be able to raise $4.5 million in working capital. “We’ll either raise it from the internal membership or we’ll raise the money from another source,” he told EPM.

The company has 60 days to raise the money as part of a deal with its lender, AgStar Financial Services PAC, which it owes about $53.6 million. In exchange for extending the maturity date of a revolving line of credit loan, Heron Lake agreed to pay 50 percent of deferred interest and the other half was forgiven, Ferguson said. As of Oct. 31, Heron Lake had $3.5 million outstanding on its line of credit with AgStar.

This isn’t Heron Lake’s first 60-day extension—the company missed a deadline to raise the money by March 1 after an extension was granted the end of December. The company expected at that time to ask for another extension, it said in SEC filings.

Financial difficulties caused the company to violate certain covenants in its master loan agreement with AgStar. The violations occurred at the end of every quarter except one from Jan. 31, 2009, to Oct. 31 according to SEC filings. The end of the year AgStar and Heron Lake agreed on an amended agreement in which AgStar agreed not to declare the ethanol plant in default on the loan.

(read full article at http://ethanolproducer.com/articles/7588/minn-plant-has-60-days-to-raise-4-5-million-in-working-capital)

Our Take:
We’re pulling for Heron Lake. In 2008, Economist John Urbanchuk calculated that a 50 million-gallon-per-year, farmer-owned ethanol plant generates $84.02 million dollars in local spending each year–more than five million more dollars than the same plant when it is owned by absentee investors.

“The most significant difference in the economic impact of farmer-owned ethanol plants comes not from operations but from the distribution of profits,” Urbanchuk said, calculating that $22.5 million, or 44 cents per gallon of production, are available for distribution to shareholders. With the wild ride energy and commodity markets have taken in the past three years and continue to take, this figure no doubt varies, but the calculation represents a fair depiction of the potential for generating local economic activity. When local people in rural communities own the production, more of the profits get pumped into the local economy.

We can’t speak to the particulars of Heron Lake’s current business situation, but giving them the benefit of the doubt that this extension will give them enough room to get back on track, we hope they stay on line and remain in the hands of local owners.  The Urbanchuk study suggests that Heron Lake Bioenergy means a lot to Heron Lake, Minnesota. When the business becomes profitable, a significant amount of the profit distributions would go to main street businesses that supply food, clothing and services, to implement, seed and farm input dealers, auto dealers, banks and other businesses. Beyond the 30-some jobs directly supported by a 50 mmgy ethanol plant, Urbanchuk found that a farmer-owned plant supports 120 jobs in the local region.

When communities across the state like Hutchinson and Eagan are seeing business closures and job losses, even as the economy grows, we can’t take a single job for granted.

So we’re pulling for Heron Lake Bioenergy. It’s good for farmers. It’s good for Minnesota.

GAO Report on government duplication reveals fragmented approach to alternative fuels

Written by Jonathan Eisenthal

A new report from the Government Accountability Office (GAO), the audit and investigative arm of the US Congress, indicates government duplication that is wasting federal resources.

Ethanol advocates decry its singling out of the ethanol blender credit program among all of the government’s energy spending. Farmers and ethanol producers suggest that ending the credit as a matter of fiscal austerity is a terribly narrow-minded approach during this critical time in the growth of alternative energy use in America. Given that price sensitivity to oil may be one of the worst drags on an economy that is still pulling itself up from Recession and still trying to add jobs, ethanol advocates suggest this move would be counterproductive if it slows growth in biofuels–a sector that supports hundreds of thousands of jobs.

The GAO report  (http://www.eenews.net/assets/2011/03/01/document_gw_02.pdf) spotlights 34 areas of duplication, and another 47 areas where agencies and Congress could reduce operational costs or enhance revenue collection. Though the majority of these findings concern homeland security and law enforcement spending, the ethanol program is singled out among all of the federal government’s energy spending.

The report finds that the Volumetric Ethanol Excise Tax Credit, which pays fuel blenders $0.45 cents per gallon of ethanol blended into gasoline, is unnecessary in light of the Renewable Fuels Standard (RFS) adopted as part of the 2007 Energy Independence and Security Act. The RFS provision alone should ensure that domestic production of conventional (grain) ethanol grows to 15 billion gallons per year by 2015. The report states that this past year, the government spent $5.4 billion on the VEETC, and in 2015, the amount would top out at $6.

“The VEETC blenders credit has worked very well as a component of the nation’s renewable energy program,” said Greg Schwarz, a farmer in Le Sueur, Minnesota who produces corn, soybeans and turkeys, and an active proponent of farmer-owned ethanol production. “It’s unclear whether ending VEETC would disrupt the incorporation of ethanol by gasoline fuel terminals, and we can’t help but perceiving politics in a report that would gut spending on ethanol and leave incentives for oil production in place.”

The only other element of the nation’s energy policy addressed in the GAO report is the “fragmented approach” to increasing alternative energy use, reducing petroleum use and lowering greenhouse gas emissions in the government’s vehicle fleet. It singles out the executive orders that have required the purchase of flexible fuel vehicles, noting that E85 is available in many areas and suggests that higher MPG non-FFVs be purchased instead.

“This is just the kind of suggestion that shows how fragmentary our approach to alternative energy remains in the US,” said Schwarz. “It’s clear that the best approach to the fleet vehicle fuel supply would be a program to vastly increase the fuel station infrastructure so that these government vehicles can pull up at any gas station and fill up with the E85 they are designed to be able to use. Like the federal highway program–this is spending that would achieve national security goals and improve the efficiency of government–and at the same time, the broader driving public would benefit. There are 8 million FFVs on American roads and not nearly enough stations that sell higher ethanol blends.”

Some ethanol advocates, including Rep. Collin Peterson (D-MN) have suggested transforming the VEETC credit into a program to fund infrastructure. With the undeniable benefits of lower emissions and reduced consumption of foreign oil, no matter how stringent the budget necessities in Washington, spending on E85 fueling infrastructure would make a handsome return on the investment.

Changing corn ethanol plants into butanol plants

A news item that appeared on the web site http://contaminationinnovation.com/2011/03/changing-corn-ethanol-plants-into-butanol-plants/)

The Colorado company Gevo has purchased a Minnesota corn ethanol plant and intends to convert it into a butanol plant.  Butanol, in addition to having a higher fuel value per unit volume than ethanol, has the potential to serve both as a carbon sink and has the ability to be used as a raw material in the production of plastics and rubber products.  (NYT Green Blog post)
  
Our take:
No one should be married to a particular form of value-added product — to the greatest extent possible, we should let demand set what use commodity corn is put to. While butonal is in transition from the laboratory bench to the full-scale commercial operation, we’ll keep putting our bets on ethanol.

The point for us is to add value in a way that encourages local ownership of energy, or other marketable materials, and that builds strength and prosperity for local farm operations. It’s been demonstrated by numerous economic models that revenues to farms stay in a community longer and have a greater multiplier effect in the community than profits generated by businesses and ownership structures that are not as connected to the local community.

If local, farmer ownership can be done with butanol production, we say more power to them. We believe the “biorefinery” concept will eventually operate in a very broad market space, competing with and even replacing petroleum-based production of plastics, clothing fibers and other materials.

As oil becomes more expensive, the biorefinery concept inches closer to reality. It will result in a more environmentally sound approach to providing the materials we all need in everyday life, while bringing even greater vitality to America’s farm producing communities.