A New Look at Value-Driven Agriculture

Bioethanol’s value starts at the farm, extends to the world

Over the last three decades, biofuels have provided a range of benefits to the world in cleaning our environment, boosting our available energy resources, and increasing economic output. Those benefits are perhaps most strongly felt at the source of production — the bioprocessing facilities and farmers who supply them with grain.

Biofuels have become the model for value-added agriculture in the modern age, tying the economic and environmental health of the world to farming in an entirely new way. The value to farmers is evident at every step in the supply chain: from small towns to states and from our nation to farmers worldwide.

According to Doug Berven, Vice President of Corporate Affairs for POET, bioethanol has elevated agriculture’s relevance on the world stage while, at the same time, boosting farmers’ fortunes.

“Biofuels are the catalyst for successful agriculture,” he said. “Successful agriculture is key to solving the world's most pressing issues, including climate change, poverty, hunger, and disease. I doubt another industry can say it can attack all of those.”

Local grain buying drives farmer benefits

The first layer of impact from biofuel production is the farmer. Bioethanol provides a local purchaser, and as demand improves, so do prices for farmers.

“Biofuels create a critical market for grains, and that market helps build margin for agriculture,” Berven said.

For farmers, being located near a bioprocessing facility means better prices for their corn. According to the University of Illinois, the impact on just the local corn basis from a 100 million-gallon-per-year increase in bioethanol capacity leads to an average of six cents per bushel more for local farmers.

Transportation costs play a large role in prioritizing local producers.

“If transporting corn is costly, the opening of a bioethanol plant or an increase in existing local bioethanol capacity will increase demand for nearby cash sales of corn and are expected to increase the local corn price,” said Beth Miller, author of the research.

Neil Schutte, a farmer in southwest Iowa, was one of the first to deliver corn when POET Bioprocessing – Ashton opened in 2004.

“It was years and years of corn piled up in bunkers and corn not being used,” said Schutte. “From there, it was a 180-degree turn from being the worst basis in southwest Iowa to maybe the best.”

Local economy

While any local employer provides jobs and economic benefits, bioprocessing facilities are different.

Bioprocessing plants have a larger impact on local areas than most production or manufacturing facilities because the feedstock supply is located in the immediate area.

“Most biofuel plants take their corn from well within a hundred miles of the plant,” said John Urbanchuk, who, as Managing Director of Agriculture and Biofuels Consulting, has done numerous economic impact studies on the industry. “Those expenditures go directly back to the corn farmer.

“Let's compare that to an automobile plant. Basically, it takes steel and other materials and then transforms them into a final product of an automobile. That's just assembly. So you've got primarily the labor component, but most of those inputs come from other locations in other states.”

With feedstock supply close to home, those dollars circulate throughout the local economy along with all the additional benefits of having a large-scale bioprocessing business in the area.

And the effects extend beyond the farm. For example, not only did POET Bioprocessing – Ashton buy corn, it provided high-quality jobs that attracted talented people, said Schutte.

“There are very few businesses in the area, and when something like that comes in, it fuels the economy,” Schutte continued.

Bioprocessing facilities are economic drivers, Berven said.

“They provide great paying jobs. They provide the construction and building of the facility, the ongoing expense of maintaining it, the team members, the grain purchases, and the animal feed,” Berven said. “There's a lot of economic activity going on at each location. When you start to count the accompanying benefits to the local economy, from local schools to state tax revenues, it really starts to add up.”

Though taxes, regulations, transportation, and other circumstances can vary from state to state, Urbanchuk says the average economic impact of each bioprocessing location on the surrounding community is quite significant.

“Every million gallons of bioethanol will contribute $3.31 million in aggregate economic impact to the local community,” Urbanchuk said. “The plant will employ 50 full-time people but will support an additional seven jobs in all sectors of the economy for every million gallons of bioethanol produced.”

Left: Neil Schutte on his farm in Iowa

Balancing grain supply benefits entire ag sector

Nationally, biofuels play an important role in balancing grain supplies. Farmers have continued to push the limits of corn yields year after year, and without a viable market for that grain, those efforts go to waste.

Biofuels allow the grain to go where it is needed most, according to the current
market conditions.

“We have been overproducing grains for generations,” Berven said. “The technology, the seed, the abundance of grain, has outpaced the demand for grain significantly for years and years until biofuels came and soaked up surplus grain, helped manage prices, reduced the needs for subsidies, and started a green revolution around the world using agriculture.”

In addition, the primary coproduct of bioethanol production — dried distillers grain — has quickly risen to become a staple feed ingredient for other areas of agriculture.

“Distillers grains are an absolute necessity in feed rations all around the world,” Berven said. "Everything from fish and poultry to cows and pigs. The world is just beginning to understand that distillers grains are imperative for cost-effective nutrition for livestock and our ability to maintain an abundant supply of meat and dairy products.”

Bioethanol is also helping drive climate-smart practices in agriculture. New technology requires money to reinvest in farming operations and equipment.  Biofuels help make farmers more profitable and give them the means to improve.

“If farmers are breaking even or losing money on their grain, they don't have money to invest in new technologies, whether that's precision till or fertilizer, cover crops, all those things,” Berven said. “Those things happen when there's a margin to be spent because then they can invest in that soil health that everybody wants from a climate standpoint to a crop growth standpoint.

Bioethanol is essential to the future of rural America

It’s hard to imagine an agriculture industry today without bioethanol.

No bioethanol would mean less demand for corn, limited supplies of high-quality feed and cost-saving fuels, fewer rural jobs and more family farms facing foreclosure.

“There'd be so much corn on the market that the price would plummet” Berven said. “Rural America would not be where it is today, and it would affect consumers all throughout the country, all throughout the world.”

Thankfully, that’s a world we don’t have to live in today. With opportunities ahead for the expanded use of biofuel through E15 and continued needs for low-carbon liquid fuel, the benefits farmers provide for the world — and the value they get for doing so — are ready to grow.




Vital is a news & media resource published by POET, presenting a variety of stories with the thought leadership one expects from the largest, most forward-thinking bioethanol producer.