innovate arkansas

Adding “energy” to food and fiber as farm commodities has helped energize the agricultural sector of the Arkansas economy. Demand for corn to produce ethanol and for soybeans and animal fat for biodiesel have contributed to strong commodity prices in 2007. But energy is not the only factor, say Dr. Bobby Coats and Dr. Michael Popp, agricultural economists in the University of Arkansas System’s statewide Division of Agriculture.

“The global economy is strong and has very high demand for all commodities, including oil, food and fiber,” Coats says. “This is a very important time in our history. We need to be aggressive in developing new technologies that can be sustained if demand for oil declines.”

In Arkansas, biodiesel production capacity is poised for a major increase from the current level of 27 million gallons a year by plants at Batesville and Stuttgart. New refineries are under construction in DeWitt, Crossett, Arkansas City and Helena. But the momentum slowed in the summer of 2007 as prices for vegetable oil and animal fat used as feedstock to produce biodiesel spiraled up, Popp says.

Arkansas is not producing ethanol from corn but is well positioned to produce ethanol from non-food energy crops, trees or crop residues when the technology for using these cellulosic feedstocks becomes economically feasible, Popp says.

Feedstock Shock

“We’re waiting for our feedstock market to settle down,” Cal McCastlain, chief executive officer of Patriot Biofuels in Stuttgart, said in September about plans to expand the refinery’s capacity from 3 million gallons of biodiesel per year to 13 million gallons. “Demand is strong, but the (profit) margins have just disappeared.”

“Long term, the future for biodiesel is awesome,” McCastlain says. “Short term, we are trying to sort out the trends. More access to locally produced and processed feedstock is essential.”

Riceland Foods, the farmer-owned cooperative based in Stuttgart, has most of the state’s oilseed crush capacity and is an occasional supplier of oil for biodiesel feedstock, but its main focus is the food industry, with markets carefully developed over decades, spokesman Bill Reed says.

Poultry and meat processing companies also provide animal fat feedstock to Arkansas refineries, but the largest, Tyson Foods, has partnered with Syntroleum Corp. in Tulsa and ConocoPhillips to supply rendered fat for branded fuel products.

New Crushing Plants

Arkansas has two new oilseed crushing plants, but they are not large enough to relieve the biodiesel feedstock shortage, Popp says.

Gary Canada of England added a soybean crushing plant to the England Dryer and Elevator Company in 2004. The plant’s one million gallons of oil goes mainly to biodiesel refineries, he says.

“I’m looking at it (expanding crush capacity), but for every load of oil you have four loads of meal,” which is not as easy to sell, Canada says. Soybean meal is a protein source for animal feed and processed foods.

Arkansas Soy Energy Group at DeWitt opened a new crushing plant this fall with capacity to produce 3.5 million gallons of soybean oil and 60,000 tons of meal. General Manager Terry McCullars says a biodiesel refinery with capacity for 7.5 million gallons per year should be online by January. The two operations represent an investment of about $10 million, he says.

McCullars says demand for meal as well as oil from the new plant is strong, mainly due to the new technology they are using, which produces a higher quality meal than some older plants.

Arkansas Soy Energy is affiliated with Hornbeck Seed Company, which markets a line of soybean varieties and provides consulting and other services to farmers. “Our basic mission is to promote the success of local farmers,” says Troy Hornbeck, chief operations officer. “If they are profitable, we all benefit.”

“We can buy beans from local farmers with a lower basis (overhead discount) than other buyers and then sell them biodiesel made from their own beans,” McCullars says.

Algae and Canola

As biodiesel entrepreneurs sort out the market trends, they are also watching emerging technologies, says Michael Shook with Agri Process Innovations at Stuttgart, which manufactures biodiesel plants.

Algae oil is one promising new technology, Shook says, which could provide very high oil yields per acre of land.

The Division of Agriculture is starting a project this fall that will help document the economic feasibility of producing algae as a new energy crop for Arkansas, say project leaders Drs. Marty Matlock, Phil Tacker, Tom Costello and Julie Carrier of the Division’s ecological engineering group.

They are installing a test bed for an “algal turf scrubber” (ATS) system near Jericho in Crittenden County. It will draw water from the Mississippi River, grow algae from the nitrogen and phosphorus in the water and return the cleaned water to the river. Algae will be harvested weekly from the scrubber. Samples will be analyzed and converted to biodiesel and butanol, which is similar to ethanol. Projected yield of biofuel is 15 to 20 gallons per day per acre, Matlock says.

The project is part of the Smithsonian Center for Environmental Restoration ATS Project also being conducted in Florida, Maryland and Michigan. Environmental benefits include removal of excess nutrients from water bodies, uptake of atmospheric carbon dioxide and production of biofuel feedstock with no use of fertilizer, Matlock says.

Canola, which is grown mainly in Canada and northern states but can be grown successfully in Arkansas, provides more oil and less meal compared to soybeans, says plant breeder Dr. Robert Bacon. Biodiesel companies are sponsoring field tests, and the Division of Agriculture has developed and released a new Canola variety. Bacon says the new variety, AR377, has produced high yields and oil content in multi-year tests in Arkansas and other states.

Some soybean crush capacity would have to be shifted to canola to provide a market for the new crop, Bacon says. Sunflowers are also being field tested as a potential oilseed crop.

Cellulosic

Using cellulosic energy crops to produce ethanol is much more efficient than using corn or other starch/sugar crops, Popp says. The technology has not yet been proven to be economical, but Popp believes it will cross that hurdle to create a market for “dedicated energy crops” in Arkansas.

The Division of Agriculture is field testing switchgrass as a potential cellulosic energy crop. It can be grown successfully on marginal land with minimal production costs,
Bacon says.

Dr. Matthew Pelkki, an economist with the division’s Arkansas Forest Resources Center at Monticello, says Arkansas paper mills are well positioned to collect and process feedstocks and eventually implement cellulosic bioenergy technology.

“The biodiesel industry is very, very young and will have stages of growth and shakeout that it goes through,” says McCastlain of Patriot Biofuels. Other pioneering entrepreneurs wrestling with major issues in their plans to expand or build biodiesel plants would likely agree.

(This article was originally published in the Fall/Winter 2007 issue of Arkansas Land & Life magazine.)