Midwest Grain Processors

April- June 2002

Don Hofstrand , value-added farm management specialist

Problem

Iowa agriculture has been going through a long process of farm consolidation that has reduced the number of farms and brought about the decline in economic activity in rural areas. In addition, the Farm Bill of 1996 removed the “safety net” surrounding production agriculture. This has caused farmers to become more vulnerable to the vagaries of commodity markets

Response

During January of 1998, an organization called Ag Ventures Alliance was formed. The mission of Ag Ventures Alliance is to facility the development of value-added agricultural business ventures. A committee was formed to explore the feasibility of developing a large-scale ethanol project.

Impact

From the activities of the Ag Ventures committee, a cooperative evolved called Midwest Grain Processors (MGP). MGP is in the process of constructing a 45 million-gallon ethanol facility. The facility will use about 15 million bushels of corn. MGP is organized as a farmer-owned cooperative.

The facility is located in northern Kossuth County near the town of Lakota , Iowa . Extensive analysis was conducted to find the best place to locate the plant in the state of Iowa . Northern Kossuth county was chosen because it has an abundance of corn and is one of the lowest priced corn areas in Iowa . Also, natural gas, railroad access, etc. were available.

Three hundred twenty acres of land were purchased for the site. The concept is to make the location into an agricultural industrial park of which only a part of it will be the ethanol facility.

The large-scale plant (45 million gallons) was selected to provide economies of scale. The larger size of plant can offset the benefit of the producer payments that ethanol plants receive in other states like Minnesota . MGP is expected to be the most efficient dry-mill ethanol plant in the state of Iowa .

More than 50 meetings were held to provide farmers an opportunity to invest in the cooperative. Meetings were held in the east two-thirds of Iowa . A few meetings were also held in Illinois . Over 900 farmers have invested about $17 million in MGP. Farmer members are required to deliver corn to the cooperative.

Construction has moved along rapidly. The plant is expected to open in October of 2002. Founders of the cooperative are already examining additional methods of processing corn at the industrial park site.

 

Page last updated: July 11, 2006
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