Ethanol adds value for farmers, fuel for consumers

It’s been a tough year for Colorado corn growers.

Water shortages and fuel increases have spiked the cost of farming to $155 per acre from $75. Though some farmers will turn to drip irrigation, the upfront cost is significant, so finding ways to make a profit becomes even more important.

The Colorado Corn Growers Association, a 600-member strong organization headquartered in Greeley, has a number of ventures, ranging from a new bank to investment in ethanol production, designed to add value for farmers.

Colorado Corn’s FarmConcept, originated more than three years ago by now-retired CEO John Cevette, includes First FarmBank, the first in the nation started by a state corn growers association; FarmInsure, a workmen’s compensation insurance provider; FarmProfit, devoted to producers’ productivity and profitability that offers a series of 10 products ranging from “bookkeeper” to “machinery manager”; and FarmCast, a media outlet.

All of the FarmConcept companies – wholly owned subsidiaries of Colorado Corn – initially share space on a floor of the Colorado Corn building on 22nd Street in east Greeley.

First FarmBank, expected to be open by the end of the year, will be a bank for farmers run by people who think like farmers, according to Trent Bushner of Yuma, president of Colorado Corn.

“We wanted to give farmers an opportunity to invest in this bank,” he explained. Fifty-five farm families from Colorado and surrounding states chose to do so with a minimum stake of $25,000 each.

Tim Hume of Springfield, former president of the National Corn Growers Association, said First FarmBank is an opportunity to increase rural development independent of traditional avenues. “It’s an opportunity to help make investments that make money and help out with the rural economy.”

Bushner agreed. “We don’t have any affect on the price of corn, but with FarmConcept, we can work on the other side of the equation, which is added value. We can give farmers an opportunity to invest in products they provide the commodity to.”

So in tandem with First FarmBank, financial opportunities will include a mutual fund designed to finance ag-related business ventures throughout the state.

Investing in ethanol

One of those ag-related businesses is ethanol production. According to the American Coalition for Ethanol’s Web site, nearly half of the nation’s ethanol plants are owned by groups of local farmers or local investors in cooperatives or limited liability companies.

One reason for that is that ethanol plants aren’t cheap. A small scale plant producing 40 to 42 million barrels of ethanol annually costs in the neighborhood of $50 million to construct; larger ethanol plants are budgeted at up to three times as much.

The six ethanol plants in Colorado that are now producing or are under construction have not had to involve large numbers of investors to raise needed capital, said Mark Sponsler, director of agronomic services for Colorado Corn. “If you’re putting together a project like this, and you’re able to deal with fewer rather than larger numbers, it will be attractive. I don’t fault them for taking streamlined approaches.”

Colorado Agri Products, operating as Sterling Ethanol LLC, built a 40-million-gallon-per-year capacity plant that started production in November 2005 in Sterling. Sterling Ethanol is also building another 40-mgy plant in Yuma, which broke ground in late July.

When running at full capacity, together the plants are expected to consume about 68 million bushels of corn and create more than a half-million tons of livestock feed each year. The ethanol produced is being marketed by agri-giant Archer Daniels Midland Inc.

Sterling Ethanol President Dave Kramer told the Business Report last year that the initial $22 million for the $50 million project came from a group of 24 local investors, including farmers, ranchers and business people in Northeast Colorado.

That’s why Colorado Corn plans to implement a mutual fund after First FarmBank is up and running. Individual investments could be as low as $5,000 or $10,000, yet when pooled can create a tidy sum attractive to future owners of new ethanol plants.

Front Range Energy LLC’s ethanol plant in Windsor, which came online in June with a capacity of 40-mgy, has teamed with Pacific Ethanol for marketing and management services.

Colorado Corn will continue to advocate strongly for an investor-producer ethanol facility. “Bottom line, we’re excited about what’s happening with renewable fuels, the benefits for our country and for cleaner air,” Sponsler said. “We have been keenly interested in how producers can benefit from ethanol. It’s obvious the ethanol industry is ramping up to meet the needs and interests of renewable-fuels consumers.”

Producers seeing benefits

Corn producers located near ethanol plants are starting to reap the benefits. “In the Sterling area, which has the longest-running (corn-based) ethanol plant in the state, I’ve heard estimates of 8 cents to 13 cents per bushel price boost just from the presence of that plant. On a crop that might sell for $2 to $2.50 per bushel, an added dime on that is significant.”

Colorado Corn, however, is not limiting itself to investments in ethanol production. It’s helping create demand for the product by leasing pumps in Greeley and selling the E85 gasoline/ethanol fuel blend for $1.99 a gallon, about 65 cents less than in other locations around the state. According to the Colorado Corn Web site, during a three-week period in July, 24,000 gallons of E85 were pumped and sold to consumers in Greeley.

Other FarmConcept investments could also be in the offing.

“If not a plant, then business startups or enhancements located in rural parts of Colorado that will benefit ag producers,” Sponsler said. “We have a lengthy list of possibilities that include value-added uses of crops and a more integrated level of processing food produce. Growers are supportive of the path we’re taking.”