Golden Grain Energy LLC
Recipient of 2005 USDA Value Added Producer grant.
Continued Innovation Drives Iowa’s Golden Grain Energy
When Golden Grain Energy (GGE) LLC began its trek into building an ethanol production facility, the industry was just gaining steam. That was in 2002.
With State of Iowa assistance through its Value Added Agriculture Products and Processes Financial Assistance Program (VAAPFAP) and because the facility would be part of an enterprise zone, the Mason City area’s entrepreneurs constructed the fifth ethanol plant in the state and the first in north central Iowa.
Production began in December 2004. In 2005, a Value Added Producer Grant (VAPG) award of $150,000 helped GGE purchase some of the 16 million bushels of corn needed for the 40 million gallon facility and “added value to corn for its members,” according to the USDA.
“It was a risk,” Walt Wendland, President and CEO of GGE, said of those early years. He remembers that initial investment period with a small chuckle. “We were told we needed to encourage people to invest enough that it will make a difference in their lives. Many were small investments at $10,000 and wouldn’t make much difference. Some at $100,000 knew it would make a difference.” For all investors, it has paid off.
Fagen Inc., from Granite Falls, Minnesota, and ICM from Colwich, Kansas, were hired to design and build the plant. Fagen will continue to handle future building projects. “These companies were very supportive early in this venture by agreeing not to exceed the prices they gave. ICM and Fagen probably construct 65 to 75 percent of the dry ethanol plants,” said Wendland.
This year the company is putting out over 100 million gallon. GGE also sells the by-product dried distillers grains (DDGS) to national and international markets and markets the wet distillers grains locally.
Now there are 42 ethanol plants in Iowa, accounting for around 30 percent of U.S. ethanol production, according to the Iowa Corn website. Yet GGE has steadily grown and, by aligning with new technologies in renewable fuels, is looking at expanding further with new products.
The original ethanol plant was a $60 million venture. A plant expansion in 2007 cost $54 million. “We are leaving our footprint in the industry,” Wendland noted.
That footprint, he explained, means having a large, positive influence on Iowa agriculture and farms by making use of 40 million bushels of area corn that once was exported. “Corn is staying here and adding jobs. We’ve brought some real qualified local people back to Mason City.” The plant currently employs 44 people.
Stability to farmers is also part of the footprint. Wendland recalled the period following the 1980s, when farmers were carrying over large amounts of grain and the price was influenced largely by foreign markets. He said GGE has helped create a more stable market for grain in the region. Farmers have done well since supply and demand have come into balance. An added benefit, “Young people are excited about agriculture again.”
Up to this point, Wendland said his company has been able to manage well. But new challenges are on the horizon. Among those:
- Risk management, which is becoming a critical factor in the ethanol industry. Profitability can come and go on a daily basis in renewable fuels.
- Increased competition. Wendland said his company has less debt and better infrastructure than many plants of comparable size. This helps GGE to be a low-cost producer.
- An ethanol production stream that has outpaced demand. He noted that GGE is at an advantage by having a strong balance sheet.
He predicted that newer startups will face a more difficult time, in part because lenders may feel the “appetite for these renewable fuels has been satisfied.” He said he knows of five anticipated ethanol plants in the area that recently failed to achieve financing.
Yet Wendland is comfortable with the industry and said his company can ride out the waves as it continues to look at new opportunities in the renewable fuels industry. He envisions ways to continue to expand on the solid infrastructure of GGE and develop new opportunities by integrating new technologies.
“It is all part of becoming a major biorefinery rather than just an ethanol plant,” he said. “We are always looking ahead and studying new ventures.” For example, along with Alliant Energy, GGE is keeping watch over development of microwavable distillers grain drying.
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/)
