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Clearfield Ethanol Owners Not Deterred by Corn Prices

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Clearfield, PA (Lancaster Farming, August 11, 2012):  Pennsylvania's lone corn-ethanol plant is operating close to capacity, even as some Midwest ethanol plants have decided to shutter their doors in the face of sky-high corn prices.

Eric Meeuwsen, general manager of the Clearfield, PA, ethanol plant, which is owned by Pennsylvania Grain Processing LLC, an affiliate of Zeeland Farm Services of Zeeland, Mich., said the recent spike in corn prices — $8 a bushel as recently as Tuesday — isn't affecting the company's immediate plans for the plant, which it reopened on July 14.

"The corn prices have come up, but so has corn ethanol, distillers grains as well," Meeuwsen said.  The plant, which can produce 100 million gallons of ethanol a year, is operating at 90 percent capacity, according to Meeuwsen.

Between 70,000 and 80,000 bushels of corn are getting trucked to the plant each day, most of it within a 120-mile radius of the plant in Pennsylvania and eastern Ohio, with two trainloads of corn coming from the Midwest.  The plant started taking corn on June 28.  Meeuwsen said the company still plans on ramping up production in hope of reaching full capacity by fall.

Several improvements have been made at the plant, including more efficient loading and unloading of materials to get customers in and out faster.

The company is also planning to increase the plant's ethanol loading capacity from one to three trucks at a time.

Having the ability to source corn locally, Meeuwsen said, has benefited the plant's operating margins, even though he acknowledged that margins right now are tight.

He also said the company has the ability to process and dry its own distillers grains (DDGS) on site to get it shipped out.

Meeuwsen said the company is also looking at other value-added uses for the ethanol, including the use of carbon dioxide, an ethanol byproduct, as a beverage grade product.

"It'll be successful. The location for the ethanol is pretty good, given our location in the Northeast," he said. "Corn prices will come and go, but I think we'll have long-term success."

The same can't be said for the overall ethanol market, which is struggling due to high corn prices and less than ideal gasoline and oil prices.

Along with that, lawmakers have called for the ethanol mandate in the federal government's Renewable Fuel Standard (RFS), which calls for 13.2 billions of biofuels to be blended into gasoline this year and 13.8 billion gallons blended in 2013, to be waived to bring down corn prices to alleviate the overall cost for feed and food.

About 40 percent of the nation's corn crop goes to produce ethanol.

Todd Schmit, associate professor of economics at the Dyson School of Applied Economics and Management at Cornell, said he agrees with recent studies showing that a temporary waiver of the RFS mandate would modestly bring down corn prices, maybe 20 to 30 cents a bushel, due to the fact that obligated parties such as oil refiners can carry over blending credits from previous years to meet the current year's requirements as well as other market factors.

Operating margins for ethanol plants, he said, are low — 78 cents of return on every dollar of operating costs — due to the fact that corn prices are high relative to the price of ethanol.

He thinks many plants will close if margins continue their decline.

"In my mind, I think we've certainly seen the ramping up of production," he said.

Jim Dunn, professor of ag economics at Penn State, said the owners of the Clearfield plant are benefiting from the fact they bought the facility for a bargain basement price compared with the amount it cost to build.

Pennsylvania Grain Processing bought the plant in April for $9.35 million at bankruptcy court in Philadelphia.

The plant was built in 2010 for $270 million, much of that financed by public money — $27 million in grants, $67 million in tax-free bonds.

But Dunn, a frequent critic of ethanol production in Pennsylvania, said the plant still has long-term challenges, including a reliable local corn market and a market for DDGS, since its remote location is far from any large number of animal operations.

"This has got to be killing them in the long run. The ethanol plants in the Midwest are really struggling right now, margins on ethanol are not good," he said. "And it costs a lot of money to dry DDGS, especially in summer. It's not something that stores gracefully."

Meeuwsen said the company currently trucks most of its DDGS to Lancaster County, with some put on rail to other markets.

But he said the location, which is closer to ports on the East Coast for possible exporting, gives it an advantage.

When it comes to getting corn from local farmers, Meeuwsen is confident there will be a sufficient supply.

"If you provide a market for a farmer, it always seems a farmer will produce," he said. "As the plant is around longer, people will meet the needs of growing corn for it."

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