An ethanol manufacturing plant in Mississippi could use more than 11 million bushels of locally-produced corn annually, potentially boosting producers' incomes on both ends of the equation, one project investor told growers attending the East Mississippi Ag Expo Jan. 31 in Mayhew, Miss.
“The bottom line is farmers are hurting, and this can help,” says Sykes Sturdivant of Glendora, Miss., who is spearheading the proposed project. “If you are in a co-op with equity in the plant, you'll also have the opportunity to make money on the other side.”
The facility, which investors say will be located in Amory, Miss., will consume 12 million bushels of corn per year, That's 1 million bushels per month, or 30,000 bushels of corn per day.
Ethanol, which is fermented anhydrous ethyl alcohol produced from a biomass such as corn, is blended into gasoline and sold as “ethanol enhanced gasoline” or as “oxygenated fuel.” Although the percentage ratio of ethanol to gasoline in the United States may be as high as 85 percent ethanol to 15 percent gasoline, the most commonly used ratio is 10 percent fuel grade ethanol to 90 percent gasoline.
Sturdivant believes the plant will boost demand for corn, increase the farmgate price of corn, and expand storage facilities in the state. “I think the price will be get better, and farmers supplying corn to the plant will be able to get five under to even the basis,” he says. “We'll also see more and more storage come in, with the help of federal incentives and market needs. Plus, I expect 5 million to 6 million bushels of storage at the plant, which will be open and accepting corn shipments 24 hours per day.”
Sturdivant, who focused his farming efforts on cotton until 1988, when reniform nematodes started wiping out his crop, is using his knowledge as a producer to help make the ethanol plant a reality.
After farming cotton for almost 10 years, he began experimenting with corn, which netted him a nematode-free 170 to 190 bushels of corn per acre. “Today, we have almost no cotton. We've just about moth-balled our cotton gin, and we have a corn elevator instead.”
It's Sturdivant's political experience, however, that's proving the most beneficial in his new endeavor. “About one year ago, we got a group together called Southern Ethanol Co. LLC to create demand for Mississippi corn,” he says.
Formed in 2001, this limited liability company was developed to investigate and participate in ethanol-manufacturing projects in the state. It has since concluded that the development of an ethanol industry in the state could be successful if properly structured for long-term competitiveness.
To fund the proposed project, Sturdivant looked to state legislation in Minnesota allowing for bonds to fund a similar project. That legislation was introduced, almost word for word, in the Mississippi legislature. “I was told there wasn't a snowball's chance in hell of it passing in Mississippi. But the bill went right through the House side without a glitch, and then sailed through the state Senate. We've had complete support of the project in Mississippi,” he says.
A 20-cent-per-gallon producer payment is authorized through the state legislation, which Sturdivant says, “will absolutely pay the debt.”
Considered by some to be the strongest ethanol-manufacturing incentive legislation in the country, House Bill No. 1130 authorizes Mississippi's commissioner of agriculture to make direct payments to new ethanol producers in the amount of 20 cents per gallon, up to 30 million gallons per year per producer, and for a period of up to 10 years.
“The incentive program expires in 2015, which should give the industry the time it needs to become established and to remain competitive over the long-term,” says Michael Ferree, managing member of Southern Ethanol Co.
That long-term goal could be aided by the passage of an energy bill in Congress which will mandate that ethanol use be doubled.
“Additional demand for ethanol should take place with the passage of the federal energy bill that is anticipated to be completed by the summer of 2003,” according to Ferree. “On April 25, 2002, the U.S. Senate passed S.517, its comprehensive energy bill. Among other things the bill established a renewable fuel standard which calls for minimum use levels of ethanol beginning in the year 2004, with approximately 2 billion gallons needed, and growing to 5 billion gallons needed by year 2012.”
The national market for fuel ethanol has had an annual growth rate of more than 10 percent in the last decade. As of June 2001, ethanol plants in the United States manufactured enough product to blend 12 percent of the nation's annual gasoline use.
One challenge for the proposed ethanol plant is the current quantity of corn grown in the state, according to plans for the facility. “Mississippi is a corn-deficit state. In 2002 Mississippi farmers grew 66 million bushels of corn, yet the state's total corn usage was approximately 116 million bushels. The average 30 million-gallon ethanol plant will process approximately 11.2 million bushels of No. 2 yellow corn annually and will need local, Mississippi-grown corn.
“Much more corn will need to be grown if Mississippi farmers are to supply the future ethanol manufacturers' corn needs. The state's ethanol incentive legislation could support an in-state ethanol industry production of 185 million gallons per year, and if all of that production was made from corn, the ethanol producers would require and process 69 million bushels of Mississippi corn annually,” the group says.
While Southern Ethanol Co. plans to locate an ethanol manufacturing facility in Amory, Miss., the group admits access to the amount of corn needed to fuel the plant is currently problematic. “Generally, ethanol-manufacturing plants try to buy all of their grain needs within a 50-mile radius of their plant. The 50-mile goal is not going to be attainable at the Amory site, at least in the short term.
“At present, Mississippi has no commercial-scale ethanol production facilities, yet the state's large agribusiness sector, access to competitive modes of bulk-product transportation, competitive utilities and labor costs, plus close proximity to potential product markets, creates a positive environment for the successful development of an in-state ethanol industry,” states Southern Ethanol's business plan.
“The good thing about corn is it can be grown statewide,” adds Sturdivant.