CVEC and Al-Corn: Two farmer-owned ethanol plants reach the 25-year mark
Written by Jonathan Eisenthal
Minnesota’s ethanol plants work together and learn from each other. It may seem like the obvious thing to do now, but 25 years ago, when the first generation of Minnesota ethanol plants were getting their start, it took a little work to put cooperation at the top of the agenda.
Cooperative business models in Minnesota’s ag world were the first thing that struck Randy Doyal. He arrived in 1996, a veteran of New Mexico’s ethanol industry, hired to be general manager of the brand-new Al-Corn ethanol cooperative in Claremont, Minnesota.
For more than a century, farmers cooperatives had helped members get the best deal on seed and fertilizer. With ethanol production, the cooperative structure was being used to share something new: risk. Big Oil, the heavily subsidized, century-old monopoly in the U.S. transportation fuel market, made ethanol look like a pipe dream.
Uncertainty and crisis loomed in the mid-1990s ag economy. What got Benson-area farmers Richard and Vicki Syverson to put their money on the line? Chippewa Valley Ethanol Company (CVEC) wasn’t yet a production facility in Benson. It was only a prospectus brochure that the Syversons’ neighbors were bringing around, talking to people about in their kitchens and living rooms. They bought 5,000 shares at $2 apiece. The purchase came with a commitment to deliver a bushel of corn for every share.
“I knew the reputation of the board,” Richard Syverson said. “They weren’t people outside the community. It was a couple of bankers, the manager of the local electric co-op, and there were some really good, solid farmers who made their livings here. I realized that there was more to it than just growing another bushel. This was about opportunities beyond the farm gate, and I appreciated that perspective.”
Close dependence on global commodity markets had made the rural American economy vulnerable. The rollercoaster of corn and soybean prices threatened not only the livelihood of farmers but all Main Street businesses in Benson and Claremont. These towns needed something to build local self-reliance and independence. Ethanol was that ticket.
Doyal recalled a story about the farmers who would become the founders of Al-Corn. They were gathered at the cafe and complaining about the terrible price of corn, as farmers do, when one of their younger members, Bruce Schmoll, said, “Why don’t you stop (complaining) and do something about it?” When another farmer, Orlo Toquam, asked him what he had in mind, Scmoll said, “value-added processing.”
Another key figure in the Al-Corn story was retired Farm Service Agency official Roger Johnson, who became the agent of the Al-Corn board, sent by them to travel around the country in 1995 to scout existing ethanol plants and gauge the potential of the project. When Johnson started out on this journey, Doyal said he told the group, “Boys, I think you’re dreaming.” When he returned, he told them, “Boys, I think you can do this!”
Many farmers like the Syversons saw the economic strength that could be harnessed through value-added processing. Splits have turned their initial 5,000 shares into almost 10,000, and they have continued to buy additional shares periodically over the years, to the point where they deliver half of their corn bushels to the ethanol plant. They have even bought shares for their children, believing in the growth potential of the investment. The Syversons feel this also keeps the kids connected to their agricultural roots.
“We deliver a bushel for every share,” Richard Syverson said. “We bought shares during the expansion (from 15 million gallons to 50 million gallons of annual production). There have been times when CVEC shares got down to a dollar or a dollar and a little change. We bought some shares when they were low, and we also bought some shares when they were high. Overall, our cost for ownership has been modest, compared to the returns we’ve had.”
And then there’s the local effect on the commodity market: the presence of plants like CVEC and Al-Corn has raised the local price for everyone by 10 cents per bushel, according to most estimates. Most of the time, CVEC pays 8 to 15 cents above the local average, Syverson said. CVEC’s move to diversify into industrial- and beverage-grade ethanol meant that it continued to pay its shareholders dividends during the pandemic, when the fuel market was in a state of suspended animation. CVEC’s division Glacial Grain Spirits produces Gray Duck Vodka.
‘When you work together, you can be so much better’
Al-Corn started out making 10 million gallons of ethanol a year. Currently, Al-Corn can turn 42 million bushels of corn into 125 million gallons of ethanol each year, along with 269,000 tons of high-protein livestock feed and 44 million pounds of corn oil.
The co-op got its first gallons of ethanol out the door in 1996. But it quickly became clear the marketing situation was a mess. Pricing was a race to the bottom, and Al-Corn not only undercut other ethanol plants, but it even undercut its own prices from one day to the next. Buyers took advantage of the confusion. Doyal went to Heartland Corn Products, a farmer-owned plant in Winthrop that began producing in May 1995, which, like Al-Corn, was built by Broin and Associates, and he asked what at the time may have seemed like a stupid question: what if we market together? Renewable Products Marketing Group, (RPMG) was the result, and it’s now the largest single marketing entity in the U.S. ethanol industry.
“When you work together, you can be so much better,” Doyal said. “You find out that your competition is with your own performance. That’s your real competition: how well can you do with what you’ve got.”
Asked about the future, Doyal speaks enthusiastically about Clear Flame Engine Technologies, a company which is developing an ethanol-based diesel fuel. Syverson sees huge potential for a 30% ethanol fuel with 98 octane that could power efficient high-compression engines. Both Doyal and Syverson feel that there is a place for liquid fuel, and ethanol, within that market, for a long time to come. Why? It’s still one of the most efficient ways to make renewable, cleaner-burning energy.
