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Corn+Soybean Digest

Size Doesn't Matter

Both Kevin Kelley and Tom Perlick are investing in the future of biodiesel, but their approaches could not be more different. Kelley, who grows 1,200 acres each of soybeans and corn in Brookston, IN, joined with a group of farmers who spawned an idea in a machine shop nearly five years ago. That idea is now resulting in a $50 million biodiesel facility, called Indiana Clean Energy.

Kelley's vision: “To diversify our farming portfolio vs. just being a commodity producer.”

Perlick, on the other hand, grows 1,000 acres of soybeans, 500 acres of corn and 300 acres of small grains near Sarona, WI. He makes his own biodiesel at a cost of about 81¢/gal. He'd rather think of the per-field profit he gets by making the fuel, plus the value of the oilseed meal his modest $20,000 German oilseed press generates.

He, along with two partners in the operation, had been talking about making biodiesel for three years. “When diesel prices went to $3.50/gal. last fall — $50/hour to run my combine — I thought there had to be a better way.”

For Indiana Clean Energy, the biggest plus — in addition to the plant's dividends for farmers getting in on the ground floor — will be an estimated 20-25¢/bu. move in basis in the area from the 60 million gallon plant. The plant should be operational by next spring.

Kelley says that he and the other investors looked at constructing a soybean crushing plant in addition to the biodiesel operation. But, they decided against it for several reasons: They didn't want to go into competition with existing plants owned by Archer Daniels Midland (ADM), Cargill and Bunge, all nearby to Indiana Clean Energy's location at Frankfort, and from which the plant will be buying soybean oil.

Kelley adds, “We thought that it was better to establish mutually beneficial relationships with processors rather than to do our own crushing. It would also take a lot more capital and infrastructure because we would have to build two separate plants. It wasn't worth the risk.”

The proximity to the ADM plant, in particular, makes the biodiesel plant even more economically feasible: A direct line from the ADM plant will deliver the soybean oil hot at 158-160°F right after it's processed, instead of the 70-156° at which most soy oil is delivered to plants. In addition, “With Cargill just 30 miles away, we can bring in oil by truck and by rail from Bunge,” he says.

The original intent, Kelley says, was to have the limited liability corporation, “farmer owned and as farmer involved as possible,” although Indiana Clean Energy will have some outside investors. Each share costs $1 with a minimum investment in the firm of $20,000. All board members but one are farmers. And that one member has many years of experience in soy processing.

While Kelley plans to use biodiesel from his plant, it will be indirectly, through his co-op, Excel. His perfect circle is to grow soybeans using biodiesel, ship the soybeans to a local crush plant, and have that oil then shipped back to his biodiesel plant.

Kelley's only major frustration in going through the process of bringing the biofuels plant to fruition has been with other growers who want the benefits but no risk.

He says, “They ask, ‘When can I deliver my beans?’ But they're unwilling to invest time and energy to make a value-added investment happen. If I sit and do nothing, then that's what will happen. If I'm not willing to take some risk, who is?”

Besides the economics, Kelley says that what his group is doing is “environmentally positive — it's renewable energy and makes the U.S. less dependent on foreign oil. This plant won't change the world by itself, but it's a step in the right direction.”

Perlick, by contrast, has been making his own biodiesel that he uses in his engines, which he says run smoother and quieter. He started with sunflowers that he grew last year, but soon will experiment with 3,000 bu. of soybeans. It's possible the economics of soybeans will beat sunflowers. But if so, it will be because of the additional value of the meal. Perlick sells his press's meal to local dairy farms.

Perlick, who is a former board member of the Wisconsin Soybean Association, says the way his small crushing machine works “is very simple.” Here's how: Oilseeds are stored in a converted silo and transported with an auger into the press in his machine shed. The press then expels the oil from the meal. The oil goes into holding tanks while meal is augured into a truck that's later transported to dairy farms.

Perlick adds methanol and sodium hydroxide to the oil, which separate the glycerin molecules from the end usable fuel product.

The only cost in making the biofuel, Perlick says, is $2.30/day for electricity, plus a return on investment for the press, facilities and labor. The unit produces about 70 gal./24 hours, or about 20,000-25,000 gal. of biodiesel per year. “It's low tech and low cost,” Perlick says, and cuts diesel costs down to about 81¢/gal. “It adds to my profit per acre.”

Perlick figures the breakeven point for his unit at $1.67/gal., including the value of the meal. If diesel drops below that, “I shut my machine off.”

Perlick isn't anticipating that will happen anytime soon. In fact, he likes saying what he did when he first started making oil in April: “I called Saudi Arabia and told them they could shut down one oil well; we have our own oil.”

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