To say that ag retailers are anxiously awaiting the development of the biofuels movement is a huge understatement. Following what looks to be a down year in 2006 in overall input revenues, most CropLife® 100 retailers are positively positive about what biofuels adoption and growth will mean for their operations in 2007 and beyond.
“Ethanol expansion increasing corn acres will help us going forward,” says Scott Hier, director of agronomy for South Dakota Wheat Growers, Aberdeen, SD.
Based upon figures compiled by the National Corn Growers Association and the Renewable Fuels Association, the nation’s 105 ethanol plants consumed more than 1.5 billion bushels of corn in 2005, approximately 15% of the total amount produced. Total production capacity of these plants is 5 billion gallons annually. If the number of new plants being built pushes this figure to near 8 million gallons in 2007 as expected, projections from USDA and independent analysts indicate that growers will
need to add 3.4 million to 4 million acres of corn to U.S. acreage totals to meet ethanol demand and still maintain the present corn utilization split (see graph on p. 26). At least one former USDA economist thinks this figure will need to be in the 9- to 10-million acre range. By the end of the decade, it is estimated that 30% of the U.S. corn harvest will be used to produce ethanol.
Getting Directly Involved
A few CropLife 100 retailers are taking a more direct approach when it comes to the push for ethanol. Several have opened their own ethanol facilities, and more are on the way. For example, CropLife 100 retailer Aurora Cooperative, Aurora, NE, has signed a letter of intent with Aventine Renewable Energy Holdings, Inc., to build a new ethanol plant 1 mile west of the cooperative’s hometown. This agreement calls for Aurora Cooperative to be the exclusive grain supplier for the plant and for a state-of-the-art grain handling facility to be built to fill this role.
For other CropLife 100 retailers, the expanded use of biofuels in the market is offering the opportunity to reduce their own energy and fossil fuel costs. As established in last month’s CropLife 100 story, 60% of the retailers polled in our 2006 survey indicated that higher fuel cost was the biggest challenge facing their profitability going into the 2007 growing season (see “Adding Fuel To The Fire, October 2006, CropLife). In a separate question on the survey, CropLife asked retailers if they — in light of uncertain fuel prices — were looking at biofuels as an alternative source of energy for their equipment. Perhaps somewhat surprisingly, only 50% said they were considering the idea. In most cases, these biofuel early adopters tend to be the smaller- to mid-sized retailers in terms of sales (ranging from $10 million to $65 million) and not the larger retail organizations.
One CropLife 100 retailer that has actively embraced biofuels in its operation is Holyoke Cooperative Association, Holyoke, CO. According to Roger Gordon, agronomy manager for the retailer, Holyoke Cooperative started using an ethanol blend in some of its equipment earlier this year. The company also uses a 5% biodiesel blend (B5) in its pick-up trucks.
Of course, the biggest step in the biofuels direction for Holyoke Cooperative, says Gordon, took place when the retailer began using a 20% biodiesel blend (B20) in its delivery trucks and off-road application equipment in the spring. “Like other retailers, we were really struggling with higher fuel prices,” he says. “After doing some heavy research looking at alternatives, we decided that B20 was the way the go with our equipment.”
At first, he adds, there was some difficulty adapting Holyoke Cooperative’s sprayers to B20 because the mix ended up plugging the existing fuel filters. However, once the company installed newer, more flexible fuel filters into its units, the sprayer fleet has run without incident. “Using B20 instead of regular diesel hasn’t really added any more acres to the per gallon operating time, but our maintenance guys have said that the B20 seems to clean out unwanted deposits in the fuel system,” says Gordon. “That’s added quite a bit of efficiency for our units. Even better, we are using a renewable, American grown product instead of sending our money overseas.”