• January 2019
  • A PUBLICATION OF THE SIOUX FALLS AREA CHAMBER OF COMMERCE

Biofuels offer economic
growth opportunity during challenging times

It's no secret that the economic outlook for the agriculture sector has been difficult over the past few years.

Commodity prices are stagnant, farm income is down and farm debt is up. It's estimated that net farm income will decrease $9.8 billion this year, and other farm income metrics will be at the lowest levels since the last financial crisis.

Biofuels are the epitome of value-added agriculture.

In fact, a new analysis from the Federal Reserve Bank of Minneapolis found that chapter 12 bankruptcies are rising in the Upper Midwest due to low commodity prices. According to an analyst at the Minneapolis Fed, current price levels and trajectories of trends indicate that this trend hasn't reached a peak.

The ag downturn is having a ripple effect across the economy. For example, the Minneapolis Fed reports that ag bank loans are also seeing the impact. "The rising trend in chapter 12 bankruptcies aligns closely with a rising level of bad ag loans among the Ninth District's 531 banks," reports the Minneapolis Fed, which serves the six states of the Ninth Federal Reserve District, including South Dakota.

But at POET we still remain optimistic about the future of agriculture as a whole and its role as an economic engine for the state of South Dakota. As we've seen in the past, biofuels can lift agriculture out of crisis, grow demand for grain and other agricultural products, and give farmers a boost in income.

Another major reason for our optimism is that growth opportunities for biofuels are on the horizon. In October 2018 President Trump announced that his administration is lifting restrictions on year-round E15 – a federally approved biofuel with 15 percent ethanol and 85 percent gasoline – which could grow demand for grain in the U.S. by 2 billion bushels annually.

That's welcome news for anyone in agribusiness or for those who interact with agriculture – farmers, bankers, seed and machinery dealers, you name it. We also see E15 and higher biofuel blends as a catalyst for expanding economic growth across America's heartland.

Biofuels are the epitome of value-added agriculture. POET is the world's largest biofuel company, and we utilize grain from across the Midwest to literally fuel and feed the world.

Each year, POET crushes 5 percent of the nation's corn. And we use each kernel of that corn to produce our three primary products:

• 2 billion gallons of biofuel (or ethanol), which displaces 1 billion gallons of finished gasoline

• 10 billion pounds of highly nutritious animal feed

• And 550 million gallons of corn oil that's used in a variety of products.

All of that adds value to farmers' grain. In fact, POET's bioprocessing locations help increase the local corn basis for farmers by 10 cents per bushel.

Another big advantage of our industry, especially during this tough climate for agriculture, is the contribution we make overall to economic growth and job creation. More than 200 ethanol plants power economic growth across the heartland, supporting more than 350,000 jobs and a stronger farm economy. POET generates $13.5 billion in sales for U.S. businesses and $3.1 billion in income for U.S. households annually.

POET is also strengthening the local economy, generating more than $2.05 billion in business revenues, $38.4 million in state and local taxes, and $384.4 million in household earnings within South Dakota. That's a significant impact across our state, which goes to show that when ag wins, we all win.

That's why we are so interested in the opportunity to grow demand for grain here at home with E15 and higher biofuel blends. That's demand that farmers can depend on, and no foreign government or trade agreement can take away.


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Jeff Lautt is President and Chief Operating Officer at POET. He is also a member of the company's Board of Directors and Vice Chairman and President of POET Biorefining, LLC. He serves on the board of directors for POET-DSM Advanced Biofuels, the company's joint venture to commercialize cellulosic ethanol from corn stover. He has also been an advocate for biofuels in Washington, D.C.; states; media and various conference venues.
Visit getbiofuel.com to search for a station near you that sells higher biofuel blends.

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