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Biofuel Bulls

October 6, 2010
Ethanol plant board members Jerry Janzig (left) and Gary Pestorious fight for fuel choice.  

By Tom Dodge

Ask corn grower Gary Pestorious his view of the food versus fuel debate, and it’s clear the argument curdles his blood. The Albert Lea, Minn., producer swiftly relays USDA August estimates that project farmers will produce a bountiful 13.3-billion- bushel corn crop. "Without ethanol, we would have more than a 6-billion-bushel carryover," Pestorious says pointedly. "What else should we do with all that corn?"

Looking out over his cropping operation, Pestorious sees no shortage of corn for food or fuel. In 2009, U.S. farmers produced a record 13.1-billion-bushel corn harvest—and some 4.5 billion bushels (about 30%) went for ethanol production. There is still room to significantly grow the ethanol market without limiting the availability of corn, says Pestorious, who has watched corn yields on his farm bump up several bushels per acre annually.

"The American farmer can support both ethanol and food demand for years," he says. There is not a production problem, he adds, but there is an access to market problem.

Ethanol Bandwagon. When Pestorious talks about ethanol, people listen. His fervor was born in the 1990s, when he worked for six years with other farmers to round up the equity to build a 13-million-gallon ethanol plant in nearby Glenville, Minn. The state of Minnesota is a strong supporter of ethanol, using a subsidy program to start its ethanol industry.

The Glenville plant went into production in 1999 and today produces 44 million gallons of ethanol a year, remaining profitable despite last year’s high corn prices and low ethanol prices.

Around Glenville, ethanol is in farmers’ blood, says Jerry Janzig, co-founder of the Glenville, Minn., plant. "Our goal is to hold the value to our corn, so our local producers can keep farming," he says. "We want to stop exporting our young people out of the county. Ethanol plants have been an example of real rural economic development."

For Pestorious and his partners, the passion is also personal. Together they raise thousands of acres of corn that need a market. Ethanol is not only a solution to America’s energy needs, but the hope that Pestorious and other farmers have built a business on.

Pestorious spent the summer making the rounds of farm shows and trade events, asking ag-related businesses to get involved in ethanol promotion and support.

Rural development, market demand and weaning America off foreign oil are the chief reasons Pestorious wants every farmer in the U.S. to promote ethanol use. As a fifth-generation farmer and board member of three Poet-operated ethanol plants, Pestorious has the background to back up his beliefs. He recently was appointed to the board of Growth Energy, a national grassroots group whose mission is to reduce greenhouse gases, expand the use of ethanol, decrease dependence on foreign oil and create jobs across the U.S.

"Now, not later, is the time for companies like John Deere, Pioneer and Monsanto to join us in pro-moting ethanol," Pestorious says. "As a farmer, I will be keeping track of which companies help support ethanol and which companies don’t." Companies that are currently associate members of Growth Energy include CNH, DuPont Danisco Cellu-losic Ethanol, Kennedy and Coe, Novozymes and Syngenta Seeds.

The market should expect to see more farmers like Pestorious becoming bullish on ethanol as the industry recovers from the crash that led to three of the biggest ethanol producers seeking bankruptcy protection. A resurgent U.S. ethanol industry will use an additional 250 million bushels of corn through the next 12 months, according to USDA, and more than 4.5 billion bushels will be used to make ethanol during this marketing year.

Ethanol production and demand is rebounding, with production reaching an all-time high in June 2010, according to data by the Energy Information Administration. Demand for June also hit a record level. Based on data from the first six months of 2010, U.S. ethanol production is running at 12.87 billion gallons on an annualized basis.
Additional Incentives. In Sep-tember, for the first time since December 2009, ethanol prices topped higher than gasoline. The potential gains have prompted Valero Energy and Sunoco, Inc., to buy ethanol plants this year. Rising ethanol profit margins led Archer Daniels Midland, the Decatur, Ill.–based agribusiness giant, to start production at its new $540 million dry mill ethanol plant in Cedar Rapids, Iowa.

The National Corn Growers Association says ethanol production could grow to 15 billion gallons without affecting food supply or requiring the tilling of more ground, due to advances in corn yields (which increased 23% just in the last decade) and new efficiencies in ethanol production. There is also potential due to increased crop conversion. In recent years, for example, Kansas, "the wheat state," has grown more corn than wheat.

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FEATURED IN: Top Producer - October 2010

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