Wednesday, December 05, 2007

How change becomes really real...

I have written and spoken ad nauseum about ethanol (Click ethanol in the Labels column at right for way more than you want), but I had an experience yesterday that re-shaped my feelings about this change in farming.

I toured an actual POET ethanol facility in Portland, IN. Where real farmers were dumping real grain (for $4.05, I might add).

The manager, Greg Noble, was kind enough to show me around this brand new (opened in Sep) facility.

I've toured plenty of plants, so while enjoyed it, that wasn't the epiphany. It was this - Portland and Jay County are very similar to my corner of the universe. Rural county of about 20,000 with one main town. The biggest difference is a consolidated high school, which I believe can bind communities like this much better than the sad dispersed format we see in much of IL.

And this plant.

Actually looking at an ethanol plant in a place just like home makes you finally capable of imagining what a difference it would make in your own backyard. Illinois of course is dominated by fewer, larger installations and processors, and we have been less inclined to jump on the ethanol infrastructure-building bandwagon. Cripes, land is expensive enough already.

But plants like this in places like mine change the range of possibilities for such areas. It makes a difference in lives that have learned not to expect much positive change, I think.

I'm going to ruminate on why this affected me as strongly as it did, and I'll post more later. But I think these historic moments we are living through in farming will take us all places we cannot now imagine.

Meanwhile, some thoughtful comments via e-mail concerning our discussion about grain growers and users. (BTW - I welcome and answer ASAP all e-mail responses to JWorld, but you guys could save me a bunch of cutting-and-pasting by commenting right here. Sign in anonymously or as your neighbor)
Your comments about admiring Cargill's approach is interesting but I would comment that providing those services by medium/small livestock operators is difficult or impossible. Working with a Cargill just puts another wall between me and my corn farmers/suppliers. That may be the way things go in the future but the farmer may find "the law of unintended consequences" could bite him if that how things turn.
This could be one of those technological areas that smaller feedlots, etc. could solve if they could find the right consultant. CRM (Customer Relations Management) software is plentiful and cheap. maybe software developers just don't realize you guys are a market. Let me see what I can dig up that could allow tiny operations to offer on-line marketing for example. Also, there have to be other businesses facing this challenge.

Plus you may be overlooking the biggest advantage of being small guy: individualized relationships with your suppliers. If you can convert your thinking from "treating everyone the same to be fair" to "client-professional confidential dealing", you can make a deal for your most valuable contacts unique to them. By building personal bonds, using your local presence, and drawing suppliers closer and deeper into your business it could work better for both of you. Let me see if I can find other examples where this has worked.
As far as the relationships with end users and merchandisers Cargill has been ahead of the other big boys in the building relationships game, which was genius btw, but as more and farms and producers consolidate the loyalty factor fades more and more. All a viscious cycle of the “bigger and uglier” It will definitely get more and more interesting and challenging to originate grain, I for one am looking forward to the challenges.
I am working on a column for later this winter on this very outcome - which I see as an inevitable result of mandate driven economics. Producers will driven to reach a scale commensurate to the adjacent links in our value chain (Pioneer and Bunge, for example). Trust me, a 10 million-bushel elevator will listen closely to a 2-million bushel producer. They can only do so by growing to sizes we are barely beginning to comprehend - and by doing it as centralized as possible.

This is a disturbing prediction to many, but then they tend to be the ones demanding mandated economics.

[Return to AgWeb]

[Let me get this straight. I just promised several posts, more research, and two columns. When will I learn to just step away from the keyboard?...]

[Update: Thanks to the first comment below, here is a link to the high speed rail-loader story. I'll try to post more when I can find out exactly what that is]


Anonymous said...

Ironic you post this, just yesterday I was reading comments in regard to a paper by Dr. Rick Whitacre from Illinois State University. He did a study on high speed rail loaders and seemed to discover the effect of a high speed loader is greater than that of an ethanol plant.

Basically the paper says the rail loaders can orginate and move more grain than the smaller ethanol plants, offering better basis and bids.

Anonymous said...

Looking at the location of Poet facilities, one has to wonder what is wrong with illinois and wisc. But it is okay to put a 6000 cow dairy in northwest illinois but not build more ethanol plants??
(press release last week)