Sourcing Corn for Ethanol

The rapid expansion of Iowa’s ethanol industry has changed corn distribution patterns to support more local processing. As more corn is used locally in fuel production, less is available for export, feed applications, and other processing. This has led to changes in grain transport, on-farm grain storage, and the function of local grain elevators. This study collected data to indicate the magnitude of current and future impacts of ethanol production on Iowa agricultural logistics.

 

Interviews with representatives of twenty Iowa ethanol plants revealed information about sourcing corn, processing capacity, corn storage capacity, corn quality specifications, truck and rail access, and co-product storage capacity and marketing. At this time, twenty-three dry grind plants and four wet mills are expected to produce 1.5 billion gallons of ethanol in Iowa in 2006. Ten new dry grind plants, one new wet mill plant, and six expansions are under construction. In addition, dry grind plants immediately across Iowa’s borders draw corn from Iowa farms. The current plants and those under construction will use 1.61 billion bushels of corn annually. Thirty-three new plants or expansions have been announced. If all announced facilities are built and operating at capacity by 2010, fuel ethanol production of 7.5 billion gallons per year in and near Iowa would consume 2.68 billion bushels of corn. Construction of all announced plants would be an aggressive projection dependent on continued favorable economic conditions; this report does not evaluate the likelihood of their construction. Dry-grind ethanol plants also produce distillers grains feed products (DGS) in various forms. Iowa ethanol plants currently produce about 4.3 million tons of DGS, which could grow to 22.5 million tons if all announced ethanol plants come online.

 

Distillers grains can substitute for other ingredients in cattle rations (up to 50% of ration), and can also be used in swine and poultry rations at a lower rate (up to 10%.) Ethanol plants located close to cattle feedlots are able to save energy costs by selling wet distillers grains, but on average only 25% (range 6% - 100%) of distillers grains is sold wet at an average of 56% moisture (range 50% - 65%). Nearly 60% (range 0% - 93%) of DGS is shipped by rail to users outside of Iowa and is shipped as dried distillers grains. Ethanol plant managers recognized that new plants and existing livestock markets would compete for corn. Sixty-two percent (range 5% - 100%) of the corn currently used by ethanol plants is purchased directly from farmers. Operators expressed a desire to source corn directly from farmers. However, most had absolute limits (typical 18% moisture, 10% damage) on acceptable quality, unlike the general acceptance policies of traditional elevators. Stored grain quality will need to be maintained more closely, over a longer period, than current markets require.

 

Plants had onsite storage for about 5% (range 2% - 12%) of annual corn use and 2.5% (range 1.6% - 4.7%) of annual distillers grains production, which makes consistent logistics a major need. Some expressed concern about adequate rail service for both ethanol and distillers grains. The need for ongoing training for current and future ethanol plant workers was stressed by managers, pointing to Iowa’s regents universities, community colleges, and Extension to take this responsibility.