Institute of Ag Professionals

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1 Institute of Ag Professionals Proceedings of the 2005 Crop Pest Management Shortcourse Do not reproduce or redistribute without the written consent of author(s).

2 The U.S. ethanol industry was expected to produce more than 2.6 billion gallons in 2003, up from a record annual production of 2.13 billion gallons in Currently, 90 ethanol plants have the capacity to produce over 4 billion gallons annually, utilizing almost 1.5 billion bushels of corn or nearly 14% of U.S. corn production. Many additional plants are under construction, with over 150 active projects being considered.

3 A 2002 report by the USDA examined numerous studies on the energy balance of ethanol production. The authors concluded that a gallon of ethanol contains 34% more energy than it takes to produce it. Nearly all ethanol currently produced in the U.S. is made from corn. Two processing methods are employed wet milling and dry-grind. Dry-grind corn processing plants produce over 65% of current ethanol output. The remaining production comes from the wet milling industry.

4 On an annual basis, an ethanol plant producing 40 million gallons per year will generate the following economic benefits to the community in which it is located: Expand the economic base of the local economy by $110.2 million, generate an additional $19.6 million of household income, support the creation of as many as 694 permanent new jobs throughout the entire economy, generate at least $1.2 million in new tax revenues for the state and local governments, generate additional revenue for local grain farmers by increasing demand.

5 In the dry-grind method of ethanol production, the entire corn kernel is ground into a coarse flour, then slurried with water to form a "mash." The mash is then cooked, treated with enzymes, fermented and distilled. Little is wasted in the production of this fuel in addition to ethanol, the manufacturing process also produces distillers grains, a high quality livestock feed, and carbon dioxide, a food and industrial product. The dry-grind production method is a rigorous biological process that requires stringent quality control.

6 Corn endosperm starch cannot be utilized directly by yeast, so it must first be broken down into simple sugars prior to fermentation. To accomplish this conversion, enzymes are added to the mash during cooking. The first step in breaking down the starch molecule utilizes an alpha-amylase enzyme and steam gelatinization and liquifaction). The next step involves adding gluco-amylase enzymes at a lower temperature to produce smaller fermentable sugars (saccharification). Traditional batch cooking is often replaced by continuous cooking processes in new and remodeled ethanol plants.

7 After cooking, the mash is cooled and transferred to fermenters where yeast is added. Saccharomyces cerevisiae is the yeast species commonly selected because of its quick, efficient production of alcohol and its ability to withstand heat, osmotic stress and high alcohol concentrations. The fermentation process generally takes less than 72 hours. The goal is a timely conversion of glucose to ethanol. Batch or continuous fermentation systems may be used, although batch processing is more common.

8 Distillation is the process of separating the ethanol from the solids and water in the mash. Alcohol vaporizes at 173 F and water at 212 F (at sea level). This difference allows water to be separated from the ethanol by heating in a distillation column. Conventional distillation/rectification methods can produce 95% pure (190 proof) ethanol. At this point, the alcohol and water form an azeotrope, which means further separation by heat cannot occur. In order to blend with gasoline, the remaining 5% water must be removed by other methods.

9 Modern dry-grind ethanol plants use a molecular sieve system to produce absolute (100% or 200 proof) ethanol. The anhydrous ethanol is then blended with about 5% denaturant (such as gasoline) to render it undrinkable and thus not subject to beverage alcohol tax. It is then ready for shipment to gasoline terminals or retailers. The solid and liquid fraction remaining after distillation is referred to as whole stillage. Whole stillage includes the fiber, oil and protein components of the grain, as well as the non-fermented starch.

10 This co-product of ethanol manufacture is a valuable feed ingredient for livestock, poultry and fish. Although it is possible to feed whole stillage, it is usually processed further before being sold for feed. First, the thin stillage is separated from the insoluble solid fraction using centrifuges or presses/extruders. The thin stillage is then sent to evaporator units to remove excess water. After evaporation, the thick, viscous syrup is mixed back with the solids to create a feed product known as Wet Distillers Grains with Solubles (WDGS).

11 To increase shelf life and lower transportation costs, WDGS is usually dried to 10-12% moisture to produce a product known as Dried Distillers Grain with Solubles (DDGS). Drying distillers grains is energy-intensive, consuming about one-third of the energy requirements of the entire dry-grind plant. However, producing a uniform, stable, highquality feed co-product is essential to the profitability of the plant, resulting in most plants producing DDGS rather than WDGS.

12 The use of ethanol as a fuel for vehicles dates back to the very beginnings of the automobile Henry Ford designed his 1908 Model T to run on ethanol. But the development of the oil industry in the U.S. met the need for cheap, abundant vehicle fuel, and ethanol was temporarily shelved. Today s limited oil supplies and insatiable demand for energy in the U.S., however, have created a pressing need for alternative energy sources, and ethanol has proven an attractive option.

13 The U.S. ethanol industry is growing rapidly. Production is projected to exceed 4 billion gallons in 2005, utilizing almost 1.5 billion bushels of corn or approximately 14% of the U.S. crop. A single dry-grind ethanol facility can add more than $100 million to the local economy of the community in which it is located. The use of ethanol in fuels reduced CO2- equivalent greenhouse gas emissions by approximately 4.3 million tons in the U.S. during 2002, the equivalent of that produced by 636,000 cars.

14 Fossil Energy Supplies Are Finite Reserves => 1.2 trillion bbls of oil Consumption => 80,000 million bbls/day Est. Supply => 15,000 days or 41 years At current consumption Courtesy of National Corn Growers Association

15 Ethanol has strategic value because it is a renewable energy source and reduces U.S. dependence on foreign oil imports. It benefits farmers by creating a substantial new market for corn supplies. As a rapidly growing industry in the Midwest, it is creating new jobs in economically depressed rural areas and small communities. As a fuel component, it burns cleanly and increases the octane level of gasoline. These advantages, coupled with legislative initiatives, have driven double-digit growth of the ethanol industry in recent years.

16 US Corn Consumption Dry mill ethanol processing will represent the single largest demand growth for US corn through the end of the decade (Percent Acres Consumed) Cereals & Food 2% Wet Mill 16% Exports 18% Wet Mill 16% Cereals & Food 2% Exports 15% Wet Mill 15% Cereals & Food 2% Exports 19% Dry Mill Ethanol 7% Dry Mill Ethanol 11% Dry Mill Ethanol 13% Feed 57% Feed 56% Fed acres are not declining Total corn acre use is increasing Distillers grains replacing some fed whole corn Feed 51% Source: ProExporter Network data, April 2005

17 Dry-grind corn processing plants produce over 65% of current ethanol output, and wetmilling plants share of total production is decreasing with the rapid construction of new dry grind plants. Increased demand, innovative production technologies and improved corn hybrids for ethanol production continue to drive a booming ethanol industry intent on meeting our nation s rising energy needs.

18 In the dry-grind ethanol industry the cost of corn makes up more than 60% of the total production cost. It is therefore essential to get the most for every dollar spent purchasing corn. In order to help meet this challenge, seed technology companies have been developing and selling corn hybrids that are best suited for dry-grind corn processing for a number of years.

19 Pioneer, a major seed technology company approaches the question with a measured approach

20 Pioneer s hybrid screening program has shown that some hybrids are clearly superior in the amount of ethanol produced per bushel of grain. Desirable grain traits include High Total Fermentables (HTF), low stress cracks and low occurrence of molds/diseases. Pioneer is leading the industry in developing analytical tools for determining ethanol yield of grain, identifying hybrids with the highest ethanol potential, and developing new hybrids with desirable grain traits for dry-grind ethanol production.

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23 While Monsanto, the other major technology supplier, looks at the issue from a market opportunity perspective

24 (M Acres) 25 M Today 1 in 8 rows of corn go to ethanol production, by in 5 rows will produce ethanol & in 10 yrs ethanol could consume nearly 1/3 of US corn. 20 M Dry Mill Wet Mill 15 M 10 M 5 M 0 M E 2010E 2015E Source: ProExporter, USDA, NCGA and Monsanto analyst estimates

25 What Are Processor Preferred & High Fermentable Corn? Processor Preferred A brand designed to deliver grain compositional value to processors and to unlock value for growers in new markets. Processor Preferred High Fermentable Corn (HFC) Corn hybrids that can deliver higher levels of fermentable starch, which allows dry mill ethanol plants to obtain higher ethanol yields for greater profitability potential.

26 Processor Preferred High Fermentable Corn Potential Grower Benefits Opportunity to improve profitability & choice Hybrids that meet commercial agronomic standards vs many past quality traits Supports reducing reliance on foreign oil Supports a cleaner environment Grower plant investors profit when the plant profits When the local ethanol plant is profitable there are significant & sustainable community benefits (grain outlet, jobs, tax revenue, local $ spent) Germplasm diversity in multiple corn seed brands Dry mill ethanol market is natural channel for biotech traits More Ethanol Per Bushel!

27 Processor Preferred High Fermentable Corn Offered in over 90 seed corn brands for Fuel Your Profits Adler Seeds AgriGold Hybrids AgSource Seeds AgVenture Asgrow Brown Seed Brodbeck Surecrop Hybrids Burrus Power Hybrids Campbell Seed Carhart's Blue Top Seed Corn Channel Cornelius Seed Corn CPS CROPLAN Genetics Crow s Dahlco Seeds DEKALB Denzler Seeds Diener Seeds Doebler Hybrids Dyna-Gro Epley Hybrids Fielder's Choice Direct Fontanelle Hybrids Four Star Seed FS Brand Seed Gold Country Seed Great Heart Seed Great Lakes Hybrids Hawkeye Hybrids Heartland Hybrids Heine Seeds Heritage Seeds High Cycle Seed Systems Hoblit Seed Horizon Genetics Hubner Seed Hughes Hybrids Hytest ICORN Integra Seed Johnson Seed Jung Hybrids Kaltenberg Seed Kaystar Seed Kruger KS Brand Kussmaul Seed Legend Seeds Lemke Lewis Hybrids LG Seeds McKillip Seeds Merschman Seeds Midwest Seed Genetics MRK Brand Munson Hybrids Mustang Brand Seeds Mycogen Seeds NC+ Hybrids North-Gro Nortec Peterson Farms Seed Pfister Hybrid Corn Prairie Seed PRIME Farm Seeds Producers Hybrids Proseed Purple Ribbon Seed Renk Seed Renze Hybrids Roeschley Hybrids Schlessman Hybrids Seeds 2000 SeedTec Select Seed Hybrids Sieben Hybrids SOI Brand Seed Specialty Hybrids Stauffer Seeds Stewart Seeds Steyer Seeds Stone Gold Standard Hybrids Sun Prairie Tech Seed Terral Hybrids Thompson Seeds Top Crop Brand Topline Trelay Trisler Texas Triumph Vigoro Viking Seed Warner Seeds Wensman Seed Willcross Seed Wilson Seed YIELDirect

28 Importance In Decision To Plant High Ethanol Producing Corn - Total - (Base=All growers, n=121) Yield Less reliance on foreign oil Ethanol is better for the environment Premium paid for high ethanol producing corn Ethanol plant provides ready market for corn Improved efficiency for plant which means more return to investors Good for local economy Availability of traits Recommendation from ethanol plant Recommendation from seed dealer Recommendation from other grower Very important (9-10) Somewhat important (7-8) Neutral (5-6) Not at all important (1-4) Don't know Percent Average Importance ranked on a scale of 1 to 10. Processor Preferred Study #2545 ( )

29 Processor Preferred is Supporting Consumer Awareness Efforts

30 Industry Collaboration to Support Ethanol NATIONAL CORN-TO-ETHANOL RESEARCH CENTER

31 Fuel Your Profits is an initiative designed to increase Processor Preferred High Fermentable Corn availability for dry grind ethanol plants, increase demand for fuel ethanol and increase the fuel infrastructure to support that demand.

32 Fuel Your Profits Fuel Your Profits is Monsanto s Processor Preferred High Fermentable Corn solutions package offering to dry grind ethanol plants. Objective: Provide a cooperative approach that improves dry grind ethanol plant feedstock with the potential of increasing plant & grower profitability while providing new market opportunities for seed companies & elevators. Note: This approach has been developed from four year's of collaborative industry learnings and two years of successful practice.

33 Thank You!

34 Al-Corn s Experience Prior to 2000 we were put in contact with representatives from Optimum Seed (which was eventually folded back into Pioneer as DuPont gained eventual control of the company. This group had an idea that there might be some certain varieties of corn which were better for use in dry grind ethanol plants. However, they were uncertain how to prove that out in the real world, or even if their models for ethanol production facilities were accurate

35 Al-Corn s Experience This meeting began a series of meetings between Al-Corn and Optimum which resulted in Al-Corn purchasing and running certain specified varieties of corn in batches in an IP manner. Evidence mounted that lab scale observations could indeed be proved out in plant scale operations. New lab methods were developed to allow for quicker tests with many more iterations. Additional plant trials validated this work.

36 Al-Corn s Experience An NIRT machine was used to determine whether or not the received varieties conformed to previously generated characteristics curves. The curves were supplied by Optimum employees. The Foss Tecator machine was purchased and owned by Al-Corn. Al-Corn tested every load of incoming corn over the next two years, generating data about its normal corn mix. We learned that varieties normally grown in our area were in the upper range for ethanol production.

37 Al-Corn s Experience Monsanto representatives came to Al-Corn with a desire to promote their seed varieties that they had identified as better for ethanol, and this included offers to add a nickel per bushel potential payment to those members who would grow and supply those varieties to our facility. Al-Corn would have to pay the nickel if there was a 2% improvement, we would split the cost if there was 1% improvement, and Monsanto would pay if improvement was below 1%. Monsanto paid.

38 Al-Corn s Experience Plants in other areas did see significant improvement in yield, however, our facility saw no difference. In fact, our growers were already growing and delivering those identified varieties. While we did not see the increase in yield, it is still our desire to see continued development of ethanol specific varieties. In this vein, Al-Corn continues to work with all technology providers to test and refine offerings, and participates in promoting those varieties to our members.