The Daily Grind

FROM THE MAY ISSUE: Low margins prompt plants to diversify coproduct streams, capturing value in efficiency.
By Matt Thompson | April 17, 2019

As the ethanol industry struggles with low margins, uncertainty around U.S. EPA rules, and an unclear export market, some plants are hedging against those factors by producing high-protein coproducts. Things like high-protein dried distillers grains and fiber plus corn oil sell for premiums and have allowed plants to diversify their revenue streams.

Keith Jakel, sales and marketing lead for Fluid Quip Process Technologies LLC, says diversification is important, not just for ethanol plants, but for other industries as well. “In any business model, it just makes sense to diversify your revenue portfolio so that you can ride out times, especially like these low-margin times we’re in right now,” he says. “When you are an industry in which your main product and your main revenue source is basically legislation-driven revenue, every couple of years, the whims of Washington or politicians could change the value of your product. The value of the coproducts produced at a plant hedge against these low-margin times.”

Dwayne Braun, general manager of ICM Biofuels LLC in St. Joseph, Missouri, agrees. The plant was the first to install ICM’s Fiber Separation Technology to produce Hi-Pro feed. He says the plant, along with ICM, evaluated the market before choosing to produce the feed. “We really went into the marketplace with the expectation of getting 150 percent of the value of our DDG price from the Hi-Pro and an equal price for the fiber plus syrup as what we got for our wet distillers grain,” he says. “And we set those through communication with our customers and we’ve been able to achieve all of those objectives.”

Deploying high-protein coproduct technologies increases a plant’s throughput. While the ethanol industry doesn’t need more supply, Jakel says plants deal with that increase by realizing gains in efficiency, which lowers the cost of production. “You do get an additional gain, but your cost to produce that gain is driven lower, so you become a more efficient producer, or the true low-cost producer,” he says.

“That efficiency gain helps plants deal with the increased production capacity that comes with the technology,” says Kurt Dieker, director of technology and strategy at ICM. “A lot of the goals are not to speed up, they’re to be more efficient, which is one of the biggest benefits of all of our technologies, is lowering the cost of operations while creating differentiated feed or additional revenue from existing sources. They want to run as efficiently as they can and then maximize their return.”
Increased efficiency with increased production lead to more value, Dieker says. “Where we believe the world is protein-short and starch-long, if we can affect what we even put in the ethanol plant to not necessarily make more gallons, potentially grind more corn, but make the same number of gallons and make more protein and oil, that’s value added today. Especially for an oversupplied ethanol market.”

Braun says increased efficiency allows the plant to change production based on market conditions. “If we’re producing for maximum throughput or maximum efficiencies, they’re not necessarily the same. And so we’re really looking to optimize the market conditions and take advantage of the Hi-Pro when we can.” During the summer, the market for cattle feed is reduced, so production needs to change to meet those demands, he says. “We aren’t able to make quite as much Hi-Pro in the summertime, but that’s understanding our local markets and switching and adapting to what is the best return for the plant, given whether it’s the corn market, the cattle market, the ethanol market.”

Capturing Value
FQPT’s Maximized Stillage Coproducts technology produces Still Pro 50, a high-protein feed ingredient made from stillage at ethanol plants. The product trades in the protein markets decoupled from corn and DDG, and sells at 250 to 300 percent of the value of DDG, or 10 to 20 percent above soybean meal,” Jakel says. “This makes MSC protein the second highest-value coproduct a plant can produce, with corn oil the main value driver on a per-pound basis,” he says. “It truly diversifies a plant’s product portfolio.” Jakel says four plants currently use the MSC technology, with two more in the process of adding it this year. And interest is rapidly growing.
ICM’s FST is installed at 10 plants, and the company’s Thin Stillage Solid Separation (TS4) will be installed at four by the end of the year.

One of the major benefits of FQPT’s technology is improved dryer operation. “The additional benefits that a plant sees with the MSC system are reduction in your dryer loading, because we’re automatically pulling off about 25 percent of the DDG pile to make the 50 percent protein product,” Jakel says. “So a plant typically sees a substantial decrease in its dryer loading.”

The technology also allows plants to produce more corn oil. “We typically see, in FQPT’s MSC system, about a 30 percent or greater increase in oil yield,” Jakel says. “That becomes another revenue stream.” The system also improves fermentation and distillation. All those factors combine to reduce the cost of production, he says.
Flint Hills Resources has used the MSC technology at its Fairmont, Nebraska, plant for about six months, and sells the protein product as NexPro. Mark Murphy, general manager of ingredients at Flint Hills Resources, says the plant is producing additional corn oil and has maintained DDG quality.

“We’re happy with the results,” Murphy says. “We’re able to make another valuable protein product for the market without affecting ethanol production.” Flint Hills plans to add the technology to its Shell Rock, Iowa, plant.

Fine-Tuned for Efficiency
Braun says the goal of FST at ICM Biofuels initially was to optimize the system’s performance. “Through that whole process, we’ve been pretty successful at being able to not only produce the high-protein distillers grains, but also to increase the throughput through the front of the plant,” Braun says. “And then also even on top of that, reap the benefits of the fiber not going through our fermenters and distillation system.”

Braun says the efficiency gains because of the technology have led to benefits that weren’t necessarily expected. “I think the real benefit for us using the ICM FST technology came in removing the fiber in the front end of the process so in our heat exchangers, there’s hardly any fouling. Temperature exchange is much more efficient,” he says. “None of the fiber is going through our beer column in distillation and so it runs much cleaner and it’s much more predictable and stable. We’ve seen some tremendous benefits that we weren’t even expecting just in how easily the new mash processes.”

While the plant staff is happy with the efficiency gains it’s achieved so far, Braun says he’d like to tweak the process even further. “We’re in a little bit of a unique situation because our feedstock is partly made up of the leftover corn particles that Lifeline Foods processes in the food mill that’s attached to us,” he says. “They mill that fiber extremely fine. A little bit finer that what we would in the ethanol plant, and so getting those fine fiber and starch molecules separated from each other a little bit better, we’re looking at some enzyme things and some additional equipment and whether it takes a little bit more time. We’re not in bad shape, but we’d like to improve that a little bit more if we can.”

Dieker says the ethanol industry will increasingly adopt technologies to produce high-protein coproducts. “People have to keep with low-cost producers,” he says. “People are making more money or have a lower cost of production, people have to keep up, so you’ll see that adopt faster after that trigger point. The other question is, where that exact trigger point really is.”

Greater Good
One of the factors plants need to consider is their local feed markets, Braun says. “We’re really looking to optimize the market conditions and take advantage of the Hi-Pro when we can and there’s certain times of the year that some of those markets are a little bit different.”
Dieker agrees with that strategy. “It kind of depends on where the plant is, what feed species they have around them, what are their ultimate goals in the ethanol facility itself,” he says. “There is a lot of value that is created by giving end users, and in this case, cattle or swine or aquaculture, the targeted feed that they really want, rather than something that’s just a mix of the pile of what’s leftover.”

Jakel says conducting feed trials for specific species is paramount. “You really have to have the feed trial data, for every specific product that is produced by an ethanol plant in this protein level, otherwise nutritionists just won’t look at your product,” he says. “You have to have that scientific evidence that it has a difference than the protein that it would be displacing. And how does it work within that specific species that they’re looking to use it in?”
Jakel says FQPT has completed more than 29 feeding trials using the Still Pro 50 protein. He says the trials all prove out the value of the product to replace soy meal and fish meal in all species tested, including the high-value markets, such as poultry and aquaculture.

Braun says helping the livestock industry is a benefit not only for ethanol producers, but also for a world population that is short on protein. “I think we’ve got to be honest in that the ethanol prices are dictated by a lot of things beyond our control and we’re blessed in this country to have all the different livestock and the agriculture components that are still there looking for our coproducts and our feed ingredients that we can create,” he says. “I think it’s a good arena for the ethanol industry to be focusing on and improving how we feed animals and humans via the meat sources, protein sources.”


Author: Matt Thompson
Associate Editor, Ethanol Producer Magazine
701.738.4922
mthompson@bbiinternational.com