Iowa ethanol producer may cut output due to tightening margins
A line that is part of the 150 to 175 trucks that bring corn to the Golden Grain ethanol plant snakes past the plant’s grain inspection station, but plant manager Walt Wendland is thinking beyond the day’s deliveries to the future.
“We’ve been through a tough stretch,” said Wendland, 57. “Corn prices are up, and the price of ethanol is down. To make things worse, imports from Brazil are up after the restrictions were removed January 1.”
“We may have to scale back production in coming weeks,” Wendland said.
Golden Grain employs about 40 workers. Wendland also manages another ethanol plant at Lawler in Chickasaw County.
The drought and the resulting rising corn prices are a two-edged sword for Iowa. Corn prices north of $7 per bushel are fine for farmers, especially those who can eke out a semblance of a good harvest this fall.
But for ethanol producers, the rise in price has chopped away all of what were handsome profit margins in 2011.
Starting Jan. 1, the 45-cent-per-gallon federal tax credit was removed, which has taken ethanol prices down from around $2.75 per gallon last year to the $2.20-$2.30 range last week.
“The saving grace to the lower ethanol price is that Brazilian ethanol will be less competitive, so their imports will be reduced,” Wendland said.
Corn prices work both ways for Wendland, as well. Both he and his wife have farms in Chickasaw County, where Wendland grew up.
“Right now our corn yields look pretty good,” said Wendland, who unlike his wife is not an active farmer.
But Wendland knows the underside of farming. After starting a farming career in 1974, he was forced off a farm a decade later by the farm crisis.
Wendland sold gluten feed to cattle producers for most of the 1980s and into the 1990s, when he became involved with investors in the building of what became Golden Grain more than a decade ago.
The plant came on line in 2003, one of Iowa’s first major ethanol operations, and now produces 123 million gallons of ethanol annually.
Since the plant opened, Wendland has seen ethanol go from a biofuels darling to a villain blamed for high food prices.
Critics of ethanol, having stripped the industry of its tax deduction and import protection, have taken aim at the federal Renewable Fuel Standard, which is the basis for mandatory use of at least 10 percent ethanol in the U.S. motor gasoline supply.
Wendland thinks the Renewable Fuel Sandard is safe from congressional overturn, at least for now.
“Both President Obama and Mitt Romney are on record as favoring the RFS,” he said.