ShareThisBy BARRIE McKENNA
Toronto Globe and Mail
Wednesday, July 25, 2007
These days, the smell of money is the slightly acrid scent of fermenting corn that occasionally wafts over town.
Here in Iowa, and across a growing swath of the U.S. Midwest, making ethanol has meant a second chance for a rural economy that lives and breathes corn.
"This town was dying a slow death," said Craig Brownlee, a third-generation corn farmer from Emmitsburg, located northwest of Des Moines. "We weren't making any money and we were living off crop subsidies. Now, people are spending money like they haven't in a long time. There's a buzz around town."
A vast new industry is rising out of cornfields. The ethanol refinery here, owned by Poet LLC of Sioux Falls, S.D., is one of 27 ethanol plants operating in Iowa. Another 19 are under construction or undergoing major expansions. Add to that a dozen bio-diesel plants, which convert soybeans into truck fuel, and it's little wonder many farmers proudly sport "I grow oil" bumper stickers on their trucks.
Iowa has become the Texas of the ethanol industry -- the heart of an industry that is now feeding the country's cars, not just its people and livestock.
This year, more than a quarter of the Iowa corn crop will go to feed ethanol plants, up 20 percent from last year. The state already accounts for roughly a third of the 6 billion gallons produced nationwide, and has visions of grabbing an even larger bite.
And if Iowa is the new Texas, Emmitsburg (pop. 3,867) might just be its Spindletop, the 1901 gusher well that launched the modern-day oil industry.
Many Emmitsburg farmers sell nearly everything they harvest to a refinery. More than 100 residents have also earned small fortunes as minority investors in the plant.
For decades, the price of corn fluctuated between $2 and $2.50 a bushel. But thanks in large part to new demand from ethanol plants like this one, the price of corn has nearly doubled in the past year alone. And most experts say it will stay high for some time. In Iowa, farmers were getting an average of $3.56 a bushel in June, up from less than $2 a year ago.
Across the United States, the corn price surge has put an extra $9 billion into farmers' pockets.
The Poet plant's towering silver corn storage silos, conveyor belts and fermenting tanks rise prominently out of the lush yellow and green corn fields that spread out as far as the eye can see.
On a rail siding beside the plant, dozens of tanker cars wait to haul ethanol to gas refineries as far away as the East and West coasts. A steady stream of hopper trucks drive their load of yellow gold into a double-ended unloading building, dumping their cargo onto conveyor belts beneath the floor.
Poet has big plans for Emmitsburg. The company is poised to spend $200 million to more than double the plant's capacity to 125 million gallons, putting it among the largest ethanol refineries in the United States.
And Poet thinks it has an answer to where it will get all that corn. A quarter of the expanded plant's output will come from a newly developed cellulose process that will turn corn husks, as well as the kernels, into automotive fuel. The process will allow the company to produce 27 percent more ethanol from an acre of corn, and consume less water.
The expansion, dubbed the Liberty Project, earned an $80 million government grant aimed at promoting renewable fuels and weaning the United States off foreign oil.
The plant's impact goes far beyond the 40 jobs the plant has already created. Poet estimates its Emmitsburg plant pumps $60 million into the local economy every year in corn purchases, wages and various goods and services it buys.
"That money turns over several times," plant manager Daron Wilson said. "It's not just the corn we buy."
Like much of rural Iowa, the town had been shrinking, as generations of young people moved away and older farmers retired. That trend has now stalled. Ben Gustafson, the ethanol plant's 28-year-old technology manager, never imagined there would be work for him in Iowa after earning a chemical engineering degree in the late 1990s.
"When I went to college, it was before the ethanol boom, and I just figured I'd wind up leaving Iowa to work," said Gustafson, who moved here with his family from another small Iowa town. "To be back in my home state is pretty great."
The economic ripple effects can be seen here, and across Iowa. Emmitsburg still looks like small towns anywhere in the United States. The downtown is dominated by several empty storefronts. But on the fringes, new businesses are opening up. Chain stores, a couple of motels, the area's first McDonald's and a large casino resort have opened in the past two years.
It has also meant brisk business for farm equipment suppliers and car dealerships. Many farmers have invested in GPS-guided combines and vast storage silos so they can warehouse corn to sell later when prices could be even higher.
"Farmers have a lot more money to spend," agreed Rick Jones, vice-president of business banking at Iowa Trust & Savings Bank in Emmitsburg. "This whole ethanol thing is changing so fast."
Farm real estate has gone though the roof, turning every landowner with more than 200 acres into a millionaire on paper. Local real estate agent Mike Wentzel of Farmers National Co. said farmers could count on a steady 5- to 7-percent rise in farm values through much of the 1990s. In the past year, good farmland has shot up as much as 60 percent, sometimes fetching more than $5,000 an acre and generating record rents for investors.
"I never thought in my wildest dreams we'd see land at $4,500 an acre," Wentzel said.
