Chad Friese, General Manager
This letter is generally referred to as the Summer Newsletter, but I feel like I’m still waiting on spring. After a challenging winter with many freeze thaw cycles which is never fun in a production facility, that thawing moisture always seems to find places to freeze later where it shouldn’t be and isn’t wanted. Then a transition into a spring season that doesn’t want to spring. Hopefully this all means the PERFECT summer.
The plant has certainly had its weather challenges, and everything has been far from perfect, but working through those challenges has been worth the effort. Margins were great as we started the 2022 fiscal year in October and the CVEC team capitalized on the opportunities. As the calendar year started we prepared for a tightening market and maybe a transition to focus more production on industrial alcohol with Glacial Grain Spirits. The big dip in ethanol prices came in January and February but everything remained profitable and then energy values and ethanol pricing started back higher. We are all starting to feel the effect of those higher prices right now, but just like in previous years of higher feedstock values the ethanol market continues to show positive margins for fuel.
CVEC continues to look at opportunities to diversify revenues and mitigate future risk. One of those risks, though I’m not sure why, is carbon intensity. Ethanol is one of the least carbon intense fuels in the energy market and has had a constant reduction over the years as ethanol yield per bushel of corn goes up and energy consumed per bushel of corn converted goes down. The carbon that comes from the plant as part of the process is actually consumed by the next crop, and the carbon is effectively recycled every year. Of course no credit or measurements are in place to track this carbon recycling. The farm is getting more and more efficient as well, but still the push for more. Due to this continued focus on carbon reductions, CVEC will be looking into areas that can continue to lower the plants “carbon intensity”. The areas that can have the greatest impact currently look to be carbon capture and storage; the carbon is collected, compressed, put into a pipeline and stored indefinitely underground. Solar power is another effective way to lower carbon intensity. Another area is working with local growers to continue to lower the carbon intensity of the feedstock coming into the plant. All these are at least a year away, but we are working through them as options. With regard to the feedstock, we are currently working with 11 other ethanol facilities and American Coalition for Ethanol on a USDA grant that would fund a pilot study and pay farmers for conservation practices focused on carbon reduction and soil management. Maybe we will have more to share on this at the fall informational meeting.
The CVEC investments are all doing well financially also, and they are all struggling with some of these same carbon focused decisions. Ringneck Energy has signed an agreement with Summit Carbon Solutions to capture their carbon, but the Guardian plants are still looking at the opportunities. All the investment plants are running well, at or above their production budgets, and finding the feedstocks they need to maintain those production levels. Feedstock for the plants may get a little tight, similar to last year with a late planting in each plants respective surrounding area making the transition to new crop later. Ringneck Energy may have difficulties getting enough corn after last year’s drought to get to the next harvest, we’ll be watching that. I think it’s possible that all the plants including CVEC have to stretch to make the transition.
Politics as always continue to frustrate the industry, but it appears that for now there is a plan in place that allows continued growth in the fuel ethanol market with the summertime exemptions for E15. There has been alot of misinformation out in the media and we all must continue to be diligent and constant in our education of ethanol’s benefits. The state of Minnesota along with 7 other Midwestern states have taken action to make E15 year round a permanent addition for all 2001 and newer vehicles starting in 2023. Nationally the best fix still needs to come from our elected officials, and there doesn’t appear to be a fix in the immediate future. The CVEC team continues to work hard on your behalf getting the most benefit that we can in this every changing and evolving market of ethanol.