Iowa spinning corn into gold

The Baltimore Sun

EMMETSBURG, Iowa -- Jeff Stillman is a fourth-generation farmer who's been battered by floods, droughts and personal hardship. But this fall, his corn turned to gold.

A national boom in the use of ethanol - a fuel distilled from corn - almost doubled the value of his harvest. So for Christmas, Stillman is giving his wife a diamond necklace and a trip to Hawaii. And he sold a few bushels to buy himself a red Ford Mustang.

"Confidence levels among farmers here are 100 percent higher now than they were in the past, because of ethanol," said Stillman, looking out his kitchen window at 1,200 acres of cornstalk stubble beside an icy lake. "There were a lot of people who went completely broke farming here during the 1980s. But some folks now are very well-heeled."

Good spirits are brimming in Emmetsburg and other tiny Midwestern farm communities that are building ethanol plants after decades of economic loss. As Maryland considers proposals to build the East Coast's first ethanol plant, the experience in Emmetsburg offers a glimpse of what a plant might mean for corn farmers on the Eastern Shore.

Ethanol plants also are a boon for small towns that are in need of jobs and hoping to slow an exodus of young people. But there is a downside to the ethanol craze. Hog and chicken farmers, among others, complain about the government subsidies that are driving the demand for corn-based fuel. They need corn to feed their animals and say that higher costs for grain cut their profits and inflate prices for consumers.

"The U.S. needs to decide if we want cheap fuel or if we want cheap food," said Greg Lear, who raises hogs near Emmetsburg. "Right now, pork is pretty cheap, but we could soon have more expensive food for the public."

Some environmentalists support ethanol because burning it produces less global warming gases. And it could reduce dependence on Middle East oil.

But others question whether America's farms can ever grow enough fuel for the country's vast fleet of vehicles and they fear that an expansion of industrial-style agriculture would mean more pollution from fertilizers.

There's no debate that ethanol means cash for corn growers. Stillman and 90,000 other Iowa farmers earned an added $2 billion this year - an average of $22,000 more each - by selling corn at prices higher than usual because 26 new ethanol plants are competing for corn across the state, said David Miller, director of research for the Iowa Farm Bureau.

Eleven more ethanol plants are being built as Iowa seeks to capitalize on its role as the nation's biggest producer of grain-based fuel. Nationally, 107 ethanol plants are in operation and 50 more are under construction.

"Iowa is going to become the energy capital of the U.S." said Jim Boyer, a corn grower near Emmetsburg. "The Midwest will become like the Middle East for alternative fuel. It's definitely an exciting time to be in agriculture."

A $65 million ethanol plant opened in Emmetsburg in March 2005, with 40 workers distilling 50 million gallons of ethanol a year. The factory is planning a $200 million expansion, which would enable 70 employees to make 125 million gallons a year. As part of the expansion, the Broin Co. plant next year plans to become the first in the nation to brew ethanol not only from corn kernels, but from discarded stems and stalks, said Mike Muston, a vice president of the Sioux Falls, S.D., firm.

This "cellulosic" ethanol could mark a breakthrough for U.S. energy independence because the method can produce more than twice as much fuel per acre as kernel ethanol, according to the Union of Concerned Scientists, a nonprofit group that advocates for environmental issues.

"It's a fast-moving industry that provides cutting-edge opportunities in rural America," said Daron Wilson, general manager of the Broin Co. operation in Emmetsburg, called the Voyager plant.

Corn prices are so closely tied to the pulse of life in Emmetsburg that a red-lighted sign flashes them above the town's grassy square. "Voyager Ethanol. Corn $3.37" per bushel, it proclaimed on a recent afternoon. A year earlier the price was $1.69.

The increase has brought hope to a town in which the population fell 20 percent, from 4,621 in 1980 to 3,706 this year. High interest rates and low corn prices in the 1980s spurred disenchantment, and many young people left.

Near the stoplight at Main Street and Broadway in Emmetsburg, the windows of Wigdahl's Hardware store are empty and dark, like several other closed shops. An old-time movie house and a feed dealer are among the businesses still operating on Main Street, which is surrounded by seemingly endless fields and grain silos. The Riviera Theater attracted an audience of three to a recent show by offering free popcorn. Nearby, the McNally Bake Shop is closed, having moved to a casino that opened last summer on the outskirts of town.

"We've lost a lot over the last 25 years - our John Deere tractor dealership, our International Harvester dealership, clothing stores, shoe store and jewelry store," said Deb Hite, owner of the Calico Cupboard craft shop on Main Street. "It's wonderful to have the ethanol plant in town, because it pays high wages and has brought young families back."

B.J. Schany, who graduated from Emmetsburg High in 1993, said he was among many in his class who left town because they saw no future in farming. Two years ago, he returned with his wife and three children to work as a manager at the ethanol plant.

"Before, I never saw farmers breaking even," said Schany, 32. "Now, there are a lot of new pickups and a lot of new farm equipment."

Steve Heldt, a farmer who doubles as Emmetsburg's community development officer, said the turnaround has been dramatic.

"In the farm crisis of the 1980s, people were desperate," he said. "Suicide hot lines were going crazy, and people were killing themselves because they were losing farms that had been in the families for decades."

He said some farmers took to growing marijuana because corn prices were so low.

"But now Emmetsburg is headed in a positive direction. It's a real change," Heldt said.

But some economists warn that the ethanol bubble could burst if federal price supports are removed. The expansion of Emmetsburg's ethanol plant is dependent on an application for an $80 million federal grant.

Congress mandated last year that oil companies add 7.5 billion gallons of the corn-based fuel to the nation's fuel supply by 2012 to reduce air pollution from vehicles. That would make the U.S. fuel supply about 6 percent ethanol, double what it is now.

The government provides a 51-cents-per-gallon federal tax break for oil companies that add the distilled grain to gasoline.

"There will be more and more ethanol plants built. But only time will tell what will happen once we reach a point of saturation and whether there will ever be enough ethanol to replace gasoline," said Kevin McNew, an economist and owner of Cash Grain Bids Inc., a Montana-based company that analyzes the industry.

Ethanol won't make a significant dent in reducing America's petroleum dependency, McNew said, until more people drive cars that can run on nearly pure ethanol. While most new cars in Brazil are designed to run on gasoline or ethanol, less than 3 percent of the engines in America have the corrosion-resistant seals and hoses (which cost roughly $100) required to handle fuel with more than 10 percent ethanol.

Brazil, the world's biggest sugar producer, manufactures 40 percent of its vehicle fuel by brewing ethanol from sugar cane. Some critics complain about America's corn-based ethanol, calling the subsidies a sign of the political influence of corn-growing states - especially Iowa, which holds the nation's first voting in the presidential primaries. But the National Renewable Energy Lab reports that while ethanol can be distilled from an array of plants, including switchgrass, wood, rice and straw, it is a myth that corn-based ethanol consumes more energy than it generates.

Hog and chicken producers in Emmetsburg complain that the high subsidies for ethanol drive up their feed prices. The unrest among hog producers is noteworthy in an area where pigs outnumber people by a ratio of more than 35 to 1, with 378,515 hogs and 10,147 people in the county surrounding Emmetsburg.

J.R. Brown trudged out of one of the long metal buildings where he keeps 8,000 pigs, wearing a raincoat and dragging a hose he'd been using to wash manure out of the stalls.

"We've seen these ethanol boom things come and go before. They say everything will change, and then it's back to reality," said Brown, 50, bits of hay and muck clinging to his beard. "With everything in agriculture, we always overdo it, and we'll probably overproduce ethanol, too. How long are they going to keep subsidizing this?"

Corn farmer Craig Kassel gets angry when he hears such complaints. He said he counts the billions of dollars spent and thousands of lives lost in Iraq as part of the U.S. subsidy of the oil industry. He believes that ethanol can help America reduce its dependence on Middle East oil, even if only by a few percentage points.

"The oil industry is getting subsidies so large that, if we ever added up the true cost of them, in terms of both money and lives lost, it would be mind-boggling," Kassel said.

Jeff Stillman, 50, also believes in ethanol. The great-great-grandson of Emmetsburg farmers speaks sparingly, with a deep voice. In winter, his farmhouse is surrounded by a bleak terrain, flat as a chalkboard, with coal-black soil and a few lonely trees.

"Growing up, there wasn't anything else that I wanted to do besides farming," he said.

He and Eileen, his wife of 28 years, who works at a soybean oil company, have two sons in their 20s, both of whom decided to leave farming. The family has endured rough times. In 1988, drought wiped out half their crop. Floods in 1993 ruined 40 percent of their corn and beans.

Stillman said the farm's net income is usually $30,000 to $35,000 a year. This year it jumped to about $42,000 because he sold 70,000 bushels to the Emmetsburg ethanol plant. He might have made more, but he'd signed contracts to sell some of this year's corn at last year's prices.

In general, demand from the state's competing ethanol plants has given farmers higher prices and greater bargaining power than when they had to sell to one grain company.

The money has come at a good time. Stillman's wife, Eileen, 49, has been fighting breast cancer. She recently completed chemotherapy, and her doctor says the prognosis is good. Stillman wanted to show his affection by taking his wife to Hawaii and giving her a diamond necklace.

In the past, she would have protested such spending. But this year, she said, she's letting up "a little bit."

"He gave me some pretty nice Christmas gifts," she said. "I don't know if it's because I've been a good girl this year or if it's because of the harvest."

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