None of the 106 ethanol plants operating or under construction in the United States lists wheat as its lone feedstock ingredient.
Three plants, two in Kansas and one in Illinois, use the cereal grain but only in combination with corn or grain sorghum.
That model is in stark contrast to the one developing in Western Canada, where wheat is the featured grain in all existing and proposed ethanol projects.
American firms say corn is hands down the most economical ingredient for ethanol production. It is listed as the key feedstock for 90 percent of the plants, followed distantly by grain sorghum, cheese whey, brewery waste and wheat.
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It is cheaper than wheat and delivers better yields, said Dan Hernandez, chief executive officer of Midwest Grain Processors in Lakota, Iowa, a farmer-owned facility that produces 190 million litres of ethanol a year.
It would cost him an extra $1 US per bushel to buy blended wheat for his plant, a large cost for a facility that processes 17 million bu. of grain annually.
“It’s simple math. It doesn’t work,” Hernandez said.
The extra $17 million spent on raw ingredients would have usurped the entire $12 million net profit the company made on last year’s ethanol sales.
So it comes as no surprise that the U.S. industry has developed around the corn-dominated Midwestern states as opposed to the wheat-dominated Plains states.
“I went to Great Falls (Montana) to try to see if I could get one of these things built there but I have a $17 million problem: the price of wheat,” Hernandez said.
The economics are different in Canada, said Brad Wildeman, president of Pound-Maker Agventures Ltd., an ethanol facility in Lanigan, Sask.
Feed wheat is cheaper than corn in many parts of the country and the byproducts from wheat-based ethanol are more valuable than those derived from corn because of wheat’s higher protein content.
“When you add all those things in, from a cost production standpoint there is no difference or very little,” Wildeman said.
Hernandez said that calculation fails to recognize that corn outperforms wheat, producing an average 10.6 litres of fuel per bu. compared to 10.2 litres from wheat. For a plant the size of Midwest Grain, that amounts to millions of dollars in additional savings.
Jason Skinner, general manager of North West Terminal Ltd., which is planning to build a $75 million Cdn ethanol plant in Unity, Sask., next spring, said it all boils down to picking the crop that delivers a comparative advantage.
“Why aren’t we feeding corn to our cattle up here or to our hogs? Because our lowest cost feed source is wheat and barley,” he said.
Brazil produces cheaper ethanol than the U.S. by using sugarcane but that doesn’t mean corn is an uneconomical choice for plants in the American Midwest, he added.
Besides, there is nothing to prevent Canadian plants from using American corn if it proves more economical. The terminal in Unity handled one million bu. of U.S. corn in 2002 when wheat was scarce on the drought-ravaged Prairies.
