March 3, 2015
By Mikkel Pates
Sioux Falls, S.D. - Jeff Broin says if farmers want corn prices back at a profitable level, they need to get involved in politics and get engaged to keep the ethanol industry strong.
At age 49, Broin is the executive chairman and founder of Poet LLC, a company that operates 27 ethanol plants across seven states, producing an estimated 1.7 billion gallons of ethanol a year.
“If it weren’t for ethanol, corn would be $1 per bushel to $1.50 per bushel,” Broin says. “Farmers need to let their senators and representatives know that we need more ethanol production in this country to save the American farm, or we’ll see a long, long period of depressed grain prices and dropping land prices that could go on for decades.”
Ensuring the Environmental Protection Agency keeps ethanol use targets strong, despite lower-than-predicted gasoline consumption, will be crucial. The EPA guidance from the 2007 Renewable Fuel Standard had mandated 14.4 billion gallons for 2014 and 15 billion gallons for 2015. EPA says it will have final numbers this spring for 2014 and 2015, and a proposed rule for 2016. The petroleum industry wants the RFS program scrapped. Significant parts of the livestock industry also oppose it.
Broin and the ethanol industry say farmers need to strongly advocate for the standards to be left alone, although they’re increasingly alone in that fight.
Broin says farmers were deep in the ethanol debate in the 1980s and into the 1990s. They became “complacent” when corn hit $7 per bushel, and more so in the drought of 2012, he says.
Ethanol helped add $5 trillion to U.S. farmland values and farmers will wake up when those dollars start to go away, he says. Broin thinks last year’s record corn yield could be followed by another record yield in 2015.
“I’ve seen technology where they’re averaging 300 bushels per acre on corn,” Broin says. “The national average is in the 160s, but the average could go to 300 bushels in the next 10 years. Where’s all that corn going to go? The only place for it to go is ethanol.”
He thinks farmers won’t have any problem feeding the world, even with an estimated 9 billion people by the year 2050.
He says the pedestrian who hears 40 percent of the U.S. corn crop is purchased by the ethanol industry is ignorant of the fact that 6 percent — the starch portion — goes to ethanol production. The rest, including distillers grains and oils, goes back into the food and animal feed supply.
“There’s a war going on between oil and agriculture for the future fuel supply of the world,” Broin says. “If that’s a shared situation, which is what it should be, agriculture and oil will both have sustainable, decent prices.
If oil wins — and ethanol never gets beyond 10 percent — oil is going to be very high-priced and corn is going to be well below the cost of production and subsidized by the U.S. government.”
Broin and his various ethanol allies are attempting to move the U.S. from a 10 percent ethanol standard (E10) in gasoline to 15 percent (E15).
David Kolsrud, president of DAK Renewable Energy Inc., of Brandon, S.D., agrees with Broin’s points on the importance of farmer involvement in the fight to keep the RFS. Kolsrud, a member of the American Coalition for Ethanol, was a former manager of the Agri-Energy plant in Luverne, Minn., one of the plants built by Broin in the late 1990s.
Kolsrud, who also farms near Beaver Creek in southwest Minnesota, acknowledges he and Broin don’t always agree, but he admires Broin for his commitment to ethanol.
Dave Ripplinger, a North Dakota State University Extension bioenergy specialist, says Broin likely has had the biggest influence on building the industry — the business model, the plants, the markets and the policy.
Ripplinger says he can’t say whether corn prices would drop to $1.50 per bushel without an RFS, because that would depend on how the existing ethanol plants would continue. But he says the outlook would be bearish. He says the pro-ethanol coalition that included farmers, environmentalists and even parts of the oil and gas industry itself are gone.
One key change has been domestic oil production in North Dakota’s Bakken oil fields.
Started at age 14
Broin has seen ethanol overcome big challenges before.
His first exposure to ethanol was when he was 14, growing up on a farm south of Minneapolis near the town of Wanamingo, Minn. Corn was cheap and farmers were heading into a credit crisis.
It was a desperate time of agricultural policy theater. The American Agriculture Movement launched 3,000 tractors to Washington, D.C., in January 1978 and in February 1979.
Broin remembers how Paul Middaugh, a microbiology professor at South Dakota State University, built the first operating dry mill ethanol plant in the country. In April 1979, Middaugh took a farm-scale alcohol plant to Washington, D.C., where he made ethanol on the National Mall. Farmers in the North Dakota, South Dakota and Minnesota built many plants from 1979 to 1981, many of them small, 10,000-gallon-per-year, inefficient plants that soon stopped working.
Broin’s father, Lowell (who still farms today) started experimenting with ethanol in 1983. He was being paid by the government to store corn in Quonset buildings.
“Storing corn for the government — being paid to grow weeds by the government,” Broin recalls. “Corn was $1.30 a bushel and it cost $2.75 a bushel to grow it, and there was no end in sight.”
In 1986, the Broins built an on-farm ethanol plant to use surplus corn and produce 250,000 gallons per year.
In 1987, the Broins bought a Scotland, S.D., plant out of bankruptcy and restarted it in 1988, running at 1 million gallons per year. It was the only operating plant in the state. Jeff Broin, who held an ag business degree from the University of Wisconsin-River Falls, was the company’s general manager at age 22.
“As soon as I got it running and starting to make some money, I knew that it had to be bigger to survive,” Broin recalls.
In 1990, Congress passed the Clean Air Act. The same year, the Broins broke ground to increase the Scotland plant to 2.7 million gallons per year, forming Broin Enterprises as a construction company. A couple years later, the Broins created Broin & Associates, a design and engineering firm. They took their own Scotland plant to 7 million gallons, then 11 million.
“We rebuilt that plant three different times,” Broin says.
They built Heartland Grain Fuels in Aberdeen, S.D., and Heartland Corn Products in Winthrop, Minn.
The Broins also created management and marketing companies to market ethanol and distillers grains from the plants they helped build. They built research and technology entities, today housed on a grand Poet campus in Sioux Falls. The subsidiaries brought DDGs into the swine, poultry, fish and pet food markets.
In 2000, the family developed Broin Project, a plan to convert starch to ethanol without cooking. The technology was released in 2004. The same year, they built a plant in Emmetsburg, Iowa, called Project Liberty, to become a cellulosic ethanol plant that uses corn leaves, husks and cobs as feedstock.
In 2005, Broin helped found the Ethanol Promotion and Information Council, to educate an “often misinformed general public” about ethanol, he says.
In 2007, Broin bought out his family members. He changed the company name to Poet LLC and expanded its headquarters. The name was created to evoke creativity shared by actual poets and farmers.
“I love that it’s short, I love that it’s memorable and that people ask why Poet? Does that make sense?” he says.
In 2008, Poet launched a quarterly magazine called “Vital.” In 2012, Poet hired Jeff Lautt as CEO, while Broin became chairman of the board.
In September 2014, the cellulosic plant in Emmetsburg opened for business.
“We’re leaving almost all of the stalk in the field for erosion control and fertilizer,” Broin says of the corn-based feedstock for the plant. “The plant’s up and operating well.”
Poet and the enzyme and yeast companies each have spent tens or hundreds of millions of dollars developing the technology, he says.
“We can get about 80 gallons of ethanol per acre, about a ton per acre of stover, which is about 80 gallons of ethanol per acre. When you look at corn around the country, you could produce about 10 billion gallons of ethanol, using 25 percent of the above-ground stover.”
A total of 100 billion tons of biomass go to waste every year in the U.S. that could produce 80 billion gallons of ethanol, Broin says.
“That’s enough to replace all of our imported gasoline and oil,” he emphasizes.
The right business model
Broin says Poet is involved in companies that have 6,000 farmer investors. The company owns about 25 percent of the stock in plants it’s involved with — ranging from 2 percent to 75 percent each, a business model that he considers vital to company success. Scotland is the only plant owned 100 percent by Poet.
“We did it right,” Broin says.
Poet built plants in the Corn Belt where corn prices were historically low, compared with national markets. The company became an expert at analyzing sites for infrastructure such as natural gas.
Broin holds up a chart that shows the price of corn and the production of ethanol from 1994 to 2014. The two values are strongly correlated.
“I remember this industry was created and talked about as a way to increase corn prices,” Broin says. “It was the way we sold the stock in the original plants, that you could hedge your grain against energy.”
But he describes the EPA blend wall as, “basically our own government holding back the industry by locking us in at 10 percent ethanol in gasoline.”
Read the original story here : Ethanol Industry And Farmers Should Work Together, Poet Exec Says