ShareThisBy DAN BROWNING, TONY KENNEDY and CHRIS SERRES
Monday, November 06, 2006
Bobby Johnson is still not used to the snide comments and envious glances.
Johnson, who owns the grain elevator in Morris, Minn., dates the resentment to a Nov. 14, 2005, meeting at the Old No. 1 Bar & Grill. There, amid impassioned speeches and accusations of selling out, Johnson and other shareholders voted to sell the city's ethanol plant to an Australian company.
The sale generated windfalls, some in excess of $2 million, for some investors. Johnson, 54, made half-a-million dollars _ enough to pay off four decades of debt. But it also turned some farmers against one another, creating division in a community once united behind the ideal of a locally owned ethanol plant.
"You couldn't pry their farms away from them, but they sold this one (ethanol plant) real quick," said Gerald Rust, a Glenwood, Minn. farmer and former chairman of the plant's board who voted against the sale.
Midwest farmers may have built the U.S. ethanol industry, but two decades later they are increasingly worried about being elbowed aside as Washington politicians, Detroit automakers and Wall Street investment bankers finally embrace it.
Just one in eight ethanol plants under construction this summer were farmer-owned, compared with eight in 10 just two years ago, according to the Renewable Fuels Association, a trade group. And with foreign and U.S. investors combing the countryside for sites to build or plants to buy, a number of farmers are opting to sell rather than risk competing against the much larger privately owned plants.
To some farmers and politicians, the notion of sending profits from an ethanol plant to far-flung investors undermines the rationale behind the industry _ that farmers reap the profits from value-added processing.
Built in 1990, the Morris ethanol plant, known locally as DENCO _ Diversified Energy Co. _ was one of the city's most conspicuous landmarks and rivaled the local branch of the University of Minnesota as a source of pride.
The facility proved so profitable that area store owners said they timed their sales around its twice-annual dividend checks. Those who bought shares in 2000 earned back almost their entire investment in dividends within two years, plant officials say.
Last year, Babcock & Brown Environmental Investments offered $8.40 in cash for every DENCO share, a 740 percent return for the company's original investors.
In Morris, some viewed the $50 million buyout as a godsend for a small plant that faced an uncertain future competing against new plants three to four times its size. More than 90 percent of the plant's 363 shareholders voted in favor of the transaction.
Yet some farmers viewed the sale as an act of betrayal _ akin to selling a local baseball team. They resented that a handful of large shareholders stood to walk away with million-dollar windfalls, while future profits would flow to a foreign company.
For Johnson, life hasn't changed much since the sale. He still works in a tiny office about the size of a moving van, scattered with buckets of grain and cigarette butts. He can still drive a nail with one measured blow and lift 100-pound sacks of feed with a single arm. And he still sticks his hand in the corn as it drops from the grain trucks, because he doesn't trust the electronic moisture testers that bigger grain elevators use.
Yet the resentment that Johnson felt that November night at the Old No. 1 still lingers. It slips out in a passing remark from old friends or acquaintances. "They'll say something like, 'You don't have to ... worry, Bobby, with all your money,' or 'If I had your money, I'd burn mine," he said. "It's not so much what they say, but the way they say it."
The irony is that Johnson isn't nearly as wealthy as some people in Morris make him out to be. He used nearly all his proceeds from the DENCO sale to pay off business loans, including about $400,000 in debts on three new grain bins he built along the railroad tracks in the center of Morris.
For the first time since he took over the grain elevator from his dying father 35 years ago, Johnson is debt-free. He no longer has to worry about passing on a mountain of debts to his 24-year-old daughter, Christine. "I didn't want her to be sitting here 25 or 30 years from now, hoping like hell this debt gets paid off," Johnson said.
But while ethanol freed him from debts, it's also eating away at his business. The ethanol plant in Morris has its own grain bins now, so more and more farmers are delivering straight to the plant and bypassing his elevator. Johnson's deliveries to the ethanol plant have fallen from 3 million bushels a year in 1998 to 800,000 bushels.
From the front window of his office, Johnson can see the semitrailer trucks speed by on their way to the ethanol plant, kicking up clouds of dust into his parking lot. It bothers Johnson that so many of his longtime customers would show such little loyalty. He wonders out loud whether they remember him unloading corn for them on Thanksgiving Day and Christmas.
"We kept her running 365 days a year. We took care of them," he said. "But some people's got short memories."
