A farm-supply co-op view of ethanol

They are like first cousins who are often mistaken for each other. Both are farmerowned co-ops with headquarters offices practically next door to each other in Columbia, Mo. Both provide vital supplies and services to their members.

But MFA Inc. and MFA Oil are two separate businesses. MFA Inc. provides members with fertilizer, seed and livestock feed, as well as grain-marketing services. MFA Oil deals mainly in gasoline and diesel fuel.

Both co-ops have much at stake in the region’s rapidly evolving renewable fuels economy.

At MFA Inc., the reaction to ethanol depends on which side of the building you are on. Ron Utterback, vice president of crop protection, farm supply and seed, is optimistic. “We could definitely benefit from it, depending on the speed of its development and how fast we adapt.”

He has little doubt that the state’s corn acreage will increase sharply as a result of ethanol development, probably at the expense of soybeans. He also expects that some land in the CRP conservation program will also be put back into production. But that will likely be acreage that “really should have never gone into the CRP to start with,” he says.

For MFA, more corn acreage means more sales, because corn requires more fertilizer and crop protectants than soybeans, Utterback says. Typically, two acres of soybeans are planted for every acre of corn in the state. So there is room to expand corn without even requiring that more land be put into production. Utterback says he thinks that the planting pattern will shift closer to a 50-50 corn/soybean split, more typical of other Corn Belt states.

When it comes to soil types and micro-climates, Missouri is a very complex state. Few know that better than Utterback, who directs MFA’s efforts to tailor its seed and fertilizer products to the state’s unique growing regions (it also supplies producers in neighboring states). MFA has climbed to the top of its market because its products have been adapted over the past century to the region’s many micro-environments and soil classifications, he notes.

The emergence of ethanol is not the only factor prompting more acres to shift to corn. New seed varieties that allow corn to thrive on drier, “tighter” soils have also been prompting some expansion of corn planting. So Utterback sees potential for this traditionally corn-deficit state to increase its corn crop considerably, and for MFA to increase its business right along with its members’ corn crops.

Livestock concerns
On the other side of the MFA Inc. building, Dr. Kent Haden, vice president of livestock operations, has some concerns. He doesn’t want to be the rain cloud over the ethanol parade. However, he gets paid to look at the health of the state’s livestock industry and factors impacting it. Ethanol is most definitely such a factor, so he has been studying its potential impact in a state that ranks second only to Texas in the size of its cow-calf herd (2.1 million cows).

His main concern is that if increased corn planting doesn’t take up the slack, competition for corn could drive prices so high that it could force some of Missouri’s livestock out of state – perhaps even to Argentina or Brazil. “When livestock goes, usually it’s poultry first, then hogs and then cattle [which corresponds to each segment’s dependence on corn for feed],” Haden says.

Haden views dried distillers grain (DDG) as a good quality protein ingredient for up to 20 percent of feed for cattle. But DDG has turned the feed picture somewhat topsy-turvy. Protein has long been the main nutrient cattle producers sought in their feeds. However, cattle on a heavy DDG ration get plenty of protein, but may not be getting sufficient starch.

Starch, of course, is stripped from corn in making ethanol. Without sufficient starch, beef does not marble properly — especially not the way the Japanese and some other Asian export markets like it, Haden says. And there’s the rub, since corn is by far the most cost-effective source of starch for cattle, Haden says.

Dressed carcasses of hogs fed a heavy DDG ration also typically weigh about 6 pounds less than corn-fed hogs, based on University of Missouri data, because more of the growth goes to the guts, notes Haden. He is not aware of any similar data for cattle. MFA is producing some special mineral supplements it recommends for producers feeding high-DDG rations.

Some have suggested that new feed yards could open near DDG sources in Missouri. Haden says he hopes it happens. But, he adds, it will be tough to accomplish because 30 Missouri counties have adopted stricter environmental regulations that make it hard to keep more than 300 head confined in one location. “And more counties are adopting those regulations.” The same regulations will likely limit growth of the state’s dairy industry, he notes.

Oil co-op sees gains
Things are more clear-cut for MFA Oil. Tom May, director of marketing, says the co-op is bullish on ethanol and is doing all it can to educate consumers about the advantages of its use. MFA Oil sells a 10 percent ethanol blend at virtually all of its 77 Break Time convenience stores and 166 un-manned retail outlets. E85, a blend of 85 percent ethanol and 15 percent gasoline used in flexfuel vehicles, is sold at 30 of those locations. Various blends of biodiesel are also available at many outlets as well.

Most of MFA Oil’s retail outlets are in rural Missouri, as well as parts of Arkansas, Iowa and Oklahoma. “So the health of rural towns is absolutely critical to the health of our cooperative. We think ethanol is making a positive economic impact on the communities we serve,” May says. MFA Oil was recently presented with the Paul Dana Award (named after the race car driver who got ethanol approved for use in the Indy 500) by the American Coalition for Ethanol, designating it as its marketer of the year.

MFA Oil has entered into a partnership with Mid-Missouri Energy (MidMo) under which it is selling E85 for 20 percent less than regular gasoline. Flex-fuel vehicles get 5 to 20 percent less fuel mileage, so a 20-percent reduction in price makes E85 a good value for the cooperative’s customers.

“MFA Oil is excited to partner with another farmer cooperative to bring more value to Missouri’s corn crop and economy. We felt working with MidMo was a great way of keeping more ethanol dollars at home,” says May.

MFA Oil gave away a Ford F-150, flex-fuel pickup truck last Fourth of July as part of an ethanol-education campaign. At that event, May says he “lost track of how many people stopped by our booth and said they would be filling up with E85 now that it costs 20 percent less than unleaded gasoline.” He also sees signs that consumers are beginning to understand that E85 is better for the environment because it burns cleaner than fossil fuels. (E85 emissions contain just 1 part per million of nitrogen oxide vs. 9 parts per million for gasoline, according to the October issue of Consumer Reports magazine).

May says he finds it “almost mind-boggling that it took the nation so long” to finally get a head of steam going behind its biofuels industry. In Missouri, there are 120,000 flex-fuel vehicles, a number that should be steadily going up as consumers get behind homegrown fuels, May says. The state of Missouri has passed a law mandating that by 2008, all gasoline in the state be blended with 10 percent ethanol, which will encourage further development of the state’s ethanol industry.

“Ethanol is not the only answer to our energy needs, but it is one thing that is working out there right now,” May says. “Cellulosic ethanol will probably be playing a role in the future, too. With sky-high gas costs, you know the market will find a way to produce more alternative fuels.”
— By Dan Campbelll, editor

“They’re the good guys!”

High oil prices, the war in Iraq and other factors prompted a group of protestors to set up a picket line outside a Big O Tire-Petro Mart gas station in Columbia, Mo., in June.

But when the leader of the group, University of Missouri librarian Rebecca Schedler, learned that the station is owned by MFA Oil, she redirected her troops, according to a report in the Columbia Daily Tribune. “That’s a farmers’ cooperative. They’re the good guys,” she said.

The picketers instead set up shop outside the gas station of a major national oil company. Chalk up another “cooperative advantage.”

September/October Table of Contents