Farmers Cooperative Studies Biodiesel Production; Takes Alternative Route
2005 was still a bandwagon year for the relatively young biodiesel industry, with many cooperatives in the Midwest eyeing ways to add profit to the soybeans they handled.
Farmers Cooperative, headquartered in Marble Rock, Iowa, was one of them. With financial assistance of a $100,000 Value Added Producer Grant (VAPG), it began to explore biodiesel production.
The study proved valuable, yet sent them in a different direction, according to Steven Bodensteiner, General Manager. The cooperative serves four locations in North Central Iowa – three for grain drying and one for energy, plus a NAPA auto parts facility.
“We went through the feasibility stages and found it was feasible to build the plant. We put together a group of producers to form a committee to explore it further,” he said.
Then the committee did some work in conjunction with other biodiesel groups and decided instead to carry out a fund drive to invest in an already established production operation. Bodensteiner said the cooperative secured financing and set up a separate LLC – Blue Marble Investments – which funneled the investment funds into the Renewable Energy Group, Inc. (REG) of Ralston, Iowa. About 150 cooperative members invested.
“It was an alternative to doing it ourselves. I don’t see us building a plant on our own . . . . It’s not core to our business,” said Bodensteiner.
According to Biodiesel Magazine (www.biodieseslmagazine.com), REG has continued to grow in its industry leader position. It already is affiliated with more than 280 million gallons of production, construction or immediate development.
Farmers Cooperative, with 406 Class A members, is a full-service agribusiness providing grain marketing, chemicals, feed, fertilizer and petroleum. It handles #2 yellow corn and soybeans.
“We’ve grown in membership steadily over the years, and we continue to grow,” he said. The cooperative decided to grow in those areas of the business that have seen growth.
Bodensteiner said the cooperative has invested heavily in GPS and other technology advances, which he thinks benefit the membership. Farmers Cooperative staff goes into the fields of its members to do material applications. He also said it has invested in larger fertilizer buildings, anhydrous equipment and equipment that can spread more than one chemical.
“We are doing some things with condo storage and have received a very good response to that – and a good response to variable rate technology (VRT). We’ve been promoting that. Some older equipment was changed; some new purchased,” he said. VRT, he explained, lays down fertilizer in 2 ½ acre grids based on the needs of the soil. Soil samples are taken from different field locations. The benefit is that farmers are applying fertilizer where it is needed – not over-applying, but applying enough.
“In theory, it should help in money going out and help the bottom line of producers.” VRT technology is focused on corn and can boost yields, give more consistent yields and better crops, according to Bodensteiner. Soybeans benefit through crop rotation practices.
He discussed some of the challenges that face Farmers Cooperative and may also affect other cooperatives:
• Keeping up with technology, particularly computer technologies and application technologies in agronomy.
• Having the capital to keep up.
Bodensteiner said the cooperative ran “discovery meetings” among its membership last summer to find out the issues they consider important. Among questions asked were: How big do they want to get? and Where do they want to be in 2013?
Other findings were farmers’ interest in dealing with volatile markets, marketing issues and risk management.
“We’ve seen up to $7 corn and now are back to $5 corn,” he noted. Of course, those numbers can change regularly.
Once fertilizer and agronomy inputs were the largest concerns; now energy cost concerns are heightened. Bodensteiner said he thinks the cost of land is going to become a future, growing concern for farmers.
In 2010 Farmers Cooperative of Marble Rock merged with Northeast Iowa Cooperative of Clermont and Progressive Ag Cooperative of Northwood to form Viafeld Cooperative. It is still in business today.
About USDA VAPG
VAPG funding has been offered by the USDA periodically since the early 2000s. A new round of funding is anticipated to be announced in the coming months. To be considered value added, projects must show how products are differentiated in specific ways from commodity crops. Typically, projects must also show how they may deliver greater returns to producers.
Independent producers, farmer or rancher cooperatives, agricultural producer groups, and producer-owned business ventures, including non-profit organizations, may apply. In previous cycles, applicants were required to be producers of the raw commodity who will maintain ownership of that commodity through the process of creating a value-added product. Grants have been available for planning projects (such as marketing and business plans and feasibility studies) and working capital projects (which might include wages or packaging supplies). (http://www.rd.usda.gov/)