By Brandi Watters, Herald Bulletin Staff Writer
ALEXANDRIA - Ready to bail out ethanol, too?
Lobbyists for the Renewable Fuels Association want Congress to send a little bailout money to failing ethanol companies across the country who've been hit hard by the drop in gas prices, the fluctuating corn market, and the plunge of ethanol prices.
Just five years ago, ethanol was hailed as the antidote for America's addiction to foreign oil, and plants shot up across the landscape of rural America.
The Midwest and its endless acres of corn quickly shot into the spotlight as the world turned its eyes on farmers and ethanol producers.
Alexandria joined that spotlight last year when the Poet Energy ethanol plant was built just outside city limits.
With an annual capacity of 60 million gallons of ethanol per year, the plant offered a permanent buyer for area farmers and gave locals a front row seat in the race for a renewable fuel source.
In the past three months, however, the industry has taken a hit.
VeraSun Energy, one of the nation's largest producers of ethanol, filed for bankruptcy at the end of 2008.
Just last week, the company announced that it was closing three of its plants in the Midwest, including one in Linden, Ind.
Today is the last day of production at a Pacific Ethanol plant in California, at least until the market rebounds.
While other industry leaders are clamoring for government assistance and the protection of Chapter 11 bankruptcy, one company is confident that it will weather the recession.
Dave Hudak is the general manager of the Poet plant near Alexandria and said the company grew in 2008 while others were laying off workers and shutting doors. "In 2008 alone, the capacity increased by 35 percent by opening five plants in Indiana and Ohio."
The Wichita-based company also hired over 350 workers across its 26 plants.
Locally, Poet employs 40 workers.
Hudak said the company, which started in 1987, has consistently grown over the years and manages to stay afloat with a combination of caution and innovation. "We have a conservative approach to risk management," he said. "We don't take risks by purchasing corn real far in advance."
This came in handy in the spring of 2008 when corn shot to $7 a bushel.
The company, which produces over 1.5 billion gallons of ethanol each year, has the proper technology to lead the industry in ethanol output, Hudak said. "That's one of the reasons that Poet is stronger than the rest of the industry. The technology is more efficient. We produce more ethanol out of each bushel of corn than any other company in the industry."
Poet's success, however, could be linked with the market's version of natural selection.
"What you see in a recession is a shake-out of less efficient firms," explained Michael Hicks, director of the Center for Business and Economic Research at Ball State University.
"What we're seeing in the ethanol industry, to a certain respect, is a natural business cycle," said Mark Walters, a representative for farmers who promotes biofuels for the Indiana Soy Bean Alliance and Indiana Corn Marketing Council.
He agreed that the ebb and flow of the market tends to reveal the companies with staying power. "Whenever you have a boom business cycle for a new industry, you naturally have a pull back and, in many cases, a restructuring and you sort of separate the men from the boys."
Poet, he said, is part of the first group. "What you see in Poet is a company that really knows what it's doing. They're very effective in controlling their costs. They make smart decisions. They make long-term decisions. They're careful. They're doing OK, even in a downturn."
Though the industry is suffering now, Walters is confident about the future. "I'm not too concerned that we're going to see this wholesale collapse of the ethanol industry. It brings jobs. It infuses capital into rural environments ... The long-term prospects for ethanol are still strong."
The most recent crisis, Hicks said, could be remedied by another surge in gas prices.
Hicks said the ethanol industry hit a major snag when gas prices started falling in November. When gas prices are high, he said, ethanol is valuable. When they are low, it's not as necessary. "At $6 a gallon of gas, there's no doubt that ethanol is a competitor. At $3, there is some doubt."