Holding Strong

Ethanol producers share strategies for success in FEW panel
By Holly Jessen | June 12, 2012

Executives of four ethanol plants formed a panel to address, “Holding Strong: How U.S. Ethanol Producers are Achieving Profitability without the Volumetric Ethanol Excise Tax Credit,” at the June 5 general session of the International Fuel  Ethanol Workshop & Expo in Minneapolis. One executive leads family-owned Marquis Energy Inc., while the others are CEOs of farmer-owned cooperatives. Tom Bryan, vice president of BBI International, served as moderator.

There were some short term effects, with blenders buying up more ethanol at the end of the year before the tax credit expired, but Ray Defenbaugh, president and CEO of Big River Resources LLC, said it was ultimately a good thing for the industry. The tax credit was benefiting blenders, while the ethanol industry was “catching flack” for it.

A bigger impact to the industry is the delay of E15, said Walt Wendland, president and CEO of Golden Grain Energy LLC. “They took away an incentive before we could grow the market,” he said, adding that it’s like getting handcuffed and then being told to fight. Clearly, Big Oil has drawn a line in the sand and is fighting not to give up any more of the consumer’s fuel tank.

Randy Doyal, CEO of Al-Corn Clean Fuel, said that in the many years he has been part of the ethanol industry, it has always fought Big Oil. However, the fight has seemed more frightening recently, and he encouraged the industry to be more active, writing letters and making calls to lawmakers.

The panelists also discussed the human factor in success. Although Mark Marquis, president and general manager of Marquis Energy, said he could list a dozen things that could help put an ethanol plant in the “upper class” of the industry, on the top is the importance of hiring talented management staff. That can be difficult for a plant that isn’t doing well, he said, as employees seek strong companies to work for.

Defenbaugh agreed, adding that staff loyalty is also important. And, although a plant may be able to save money with fewer staff members, he didn’t consider it a bad thing if his company had one more person on staff than another plant. “The skinny is not always the best,” he said.

Doyal said his company has great employees with a passion for learning. By giving staff the freedom to ask questions and try new things, the company has identified things that are not best practices and also many that are excellent ways of doing things.

Marquis talked about not losing sight of the fact that the ethanol industry is a good industry, not a villain. The opposition is speaking with a loud voice, spreading misinformation far and wide. “We want to make sure staff at our plant are proud of what we do,” he said. 

Defenbaugh stressed the importance of access to adequate capital, comparing capital to a jugular vein. The industry will have its up and downs and adequate capital will keep a company going in those hard times. “You don’t want the bank to make all your decisions for you because its goals and your goals aren’t always the same,” he said.

The speakers also talked about the fact that their companies are open to investing in or purchasing additional ethanol plants. That’s particularly important for Al-Corn, Doyal said, as the 45 MMgy plant is older than 90 percent of the rest of the industry and smaller than 75 percent of the rest of the industry. Instead of expanding the size of its facility, the company has diversified by investing in other ethanol plants. “That’s a huge plus for us,” he said.

Golden Grain Energy has also worked to form helpful relationships, including an agreement to share management with Homeland Energy Solutions LLC. Although the company prefers to invest inside the fence, it has invested in and sits on the board of three other ethanol production companies. The advantage, he said, is sharing ideas and experiences for mutual progress.  —Holly Jessen