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Ethanol plants are good for rural America, but will it last?

Agriculture.com Staff 10/27/2006 @ 3:36pm

Farmers have been saying for years that ethanol plants give a boost to the economies of small towns and rural communities. Now they've got scholarly studies that show just how important local ownership can be- something that activists and farm leaders hope will help keep ethanol dollars local.

An economic study for the National Corn Growers Association by John Urbanchuk, shows that the contribution to a local economy from a farmer-owned plant is as much as 56% larger than from an absentee-owned corporate plant. That's because some jobs at the corporate plant may be consolidated at the home office far away, and because the locally-owned plant generates dividends that are mostly spent by its owners in the community. The study examined a typical 50-million gallon a year dry mill ethanol plant.

You can find the full study at: www.ncga.com.

Another study, overseen by Iowa State University's Leopold Center for Sustainable Agriculture, shows that a plant that is not locally owned would directly or indirectly stimulate 133 jobs in the regional economy. But with every 25% increase in local ownership of a plant, 29 more jobs are added.

One of the economists who did the study, David Swenson, said the increase in jobs comes from local plant owners spending their dividend checks. A summary of the study, which was funded by the W.K. Kellogg Foundation, is available online at: http://www.valuechains.org/bewg/Documents/eth_sum0706.pdf.

Swenson points out, too, that if ethanol plants have financial losses, communities that are more dependent on locally-owned plants will have greater losses of jobs.

Bruce Noel, a fourth-generation Michigan farmer who heads the National Corn Growers Ethanol Committee, said his group isn't opposing continued development of absentee-owned plants, but NCGA is looking for ways to help farmers to continue to invest in the industry. Currently, nearly half of all ethanol plants and 38% of all production are owned by farmer co-ops or LLCs. But the Renewable Fuels Association considers only two of the plants now under construction to be farmer-owned.

Noel tells Agriculture Online that after the recent Advancing Renewable Energy Conference in St. Louis, Corn Growers met with Energy Secretary Samuel Bodman and USDA Undersecretary for Rural Development Tom Dorr to discuss ways to keep ethanol production in farmer hands.

Corn growers would like to see investor-owned plants offer ownership to farmers and local people, but the net worth requirements, typically $1.5 million, are often out of reach. "Especially the younger farmers and those without great net worth are finding it hard to get in at any level," Noel said. "It's kind of the rich getting richer scenario, if I may be blunt about it."

"We're looking at what is possible for NCGA as an organization to do," he adds. "We're looking at some ideas."

David Morris of the Institute for Local Self Reliance (www.ilsr.org) in Minneapolis, has some ideas, too. If anything, current federal policy in the Department of Energy favors larger-scale production that's not locally owned, he said. And the existing 51 cent-a-gallon tax credit that goes to fuel blenders using ethanol is encouraging absentee investment in the ethanol industry.

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