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Moving ahead, with risks

Published on 31 August, 2006, Last updated at 01:09 GMT

By Mark Coddington

No, it's not in the dictionary, but it refers to a special moment of unity or alignment of several factors, a definition that Euken, an industrial specialist at Iowa State University, said is perfect for the ethanol industry in Nebraska.

In a lecture at College Park for the Grand Island Area Chamber of Commerce Agriculture Committee's Ethanol Forum, Euken analyzed the factors that are furthering the state's ethanol boom -- technological development, capital investments and increasing demand from consumers -- and warned farmers and businesspeople of its potentially worrisome fallout.

Euken highlighted a recent Iowa State study that looked at the indirect economic impact of ethanol plants' ownership. In plants that were owned by shareholders within their corn-producing markets, the number of jobs created and the overall economic impact on their communities was significantly greater.

The study found that one Iowa plant with 73 percent local ownership that produced 50 million gallons per year created $52 million in revenue and 318 jobs in its area through the business generated through transporters, maintenance and salary spending. But if the plant had been externally owned, it would have created $3 million less revenue and 53 fewer jobs, the study found.

Euken said the study's findings led to a simple conclusion: Local ownership works, and ethanol producers would be wise to put plants in local hands before oil giants get their hands on them.

"Oil companies are going to get into this big-time," she said. "There's a lot of people with deep pockets who can come in and be the second owners of these things."

Euken recommended local ownership as a way to lessen the adverse impact of what she called overbuilding of ethanol plants. She said the amount of corn needed for the myriad ethanol plants recently built or under construction in Iowa would require the state to import 638 million bushels. While Nebraska is still a net exporter, she suggested a similar situation could be in store for the state if ethanol plant construction continues to expand.

In places where ethanol plants' demand for corn outstripped the amount of corn available, corn bidding would be driven up, Euken said, leaving hog and cattle feeders scrambling to pay rapidly increasing prices.

That would create a situation economists call "economic discontinuity," in which the inflated demand for ethanol would upset other ag markets.

"There's so much momentum behind (plants) now," she said, "but when we build, we are going to create problems."

But Euken also highlighted several processes being developed that could conserve corn and create more uses for ethanol's byproducts.

Fractionation, a process that separates the kernel to squeeze out its oil, produces a nutrient-rich swine and poultry feed that she said may soon be tweaked to benefit cattle.

A process called enzymatic hydrolysis recycles many of ethanol's byproducts to use lignocellulose to create ethanol using genetically modified enzymes.

And pyrolysis, a process that uses heat without oxygen to pressure a material to turn it into a gas, produces charcoal as a byproduct. That carbon-rich charcoal can be added to soil, reducing its need for ammonia fertilizer and increasing its quality. With concern about global warming rising, Euken said, demand for carbon is growing, making it an opportune time to produce and sell the product.

Euken warned that this technology is in its infancy and ethanol producers must continually consider their practices' economic sustainability for hog and cattle producers. But she predicted that these new processes would turn ethanol plants into biorefineries, increasing the longevity and demand for corn beyond ethanol production.

"I really see that grain elevators are going to be a hub with activity going on all around them," Euken said


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