A rosy or rocky future?

Minnesota ethanol co-ops survive challenges

Perhaps the most visible and controversial value-added processing co-ops are ethanol plants. Although the ethanol industry lagged in the 1980s, it rapidly gained in the ’90s when the Minnesota legislature decided to subsidize ethanol at 20 cents per gallon. The subsidies are routinely criticized, but they are “common for developing an infant industry,” says Steve Olson, manager of AURI’s Marshall field office, “and it has put Minnesota out front.”

In 1992, the state expanded mandates for oxygenated fuels, which can be met with ethanol blends. To comply with the federal Clean Air Act, the state required that oxygenated fuels be sold in the 10-county metro area during months carbon monoxide levels are highest: October to February. Three years later the requirement was instituted year-round and, in 1997, statewide.

According to Ralph Groschen, head of the Minnesota Department of Agriculture’s ethanol program, nine of Minnesota’s 12 cooperative ethanol plants have started up in the past five years. Collectively, plants owned by 8,730 farmer members are capable of turning 78 million bushels of corn into 200 million gallons of ethanol every year -- about enough to meet the state’s demand.

Ethanol plants are doing fine so far, Groschen says. They are current on loan obligations and making premium payments to their members. “In general plants have experienced stock splits and are selling stock for more than the original sale price.” However, ethanol prices are terrible right now, Groschen adds. Also, each ethanol co-op is subsidized for a limited time “In the next few years some will be beyond the 10-year timeline and won’t receive producer payments,” Olson says.

How will they adjust? They need to look at sidestreams such as products made from ethanol or its byproducts to boost value, Olson says. AURI is investigating methods to increase ethanol profitability. For example, co-ops could collectively market distiller grains, a byproduct of ethanol production sold as high-grade feed.