From the Ground Up

Three brothers from Arkansas, who already develop and grow their own soybean seed and provide crop monitoring and management services, aim to vertically integrate their business by buying soybeans, crushing them and turning the oil into biodiesel.
By Susanne Retka Schill | September 04, 2007
Soybean farmers in the DeWitt, Ark., area, will soon be able to purchase seed, sell their crop and buy fuel to power their equipment from the same company. Their small town in the Mississippi Delta is home to the sharp new facilities of Arkansas SoyEnergy Group LLC, the latest of several agricultural ventures started by the Hornbeck brothers. Jon Hornbeck is chief financial officer and Troy Hornbeck is chief operations officer of the Hornbeck Agricultural Group, while Jeff Hornbeck manages the farm. With Arkansas SoyEnergy, the brothers are taking vertical integration a step further-not only do they raise soybean seed, they research and develop their own varieties, offer crop monitoring and farm management services and now they will be buying soybeans to crush and turn into biodiesel that will be sold locally. The companies within the Hornbeck Agricultural Group include Hornbeck Brothers Partnership, Hornbeck Seed Co. Inc., Worldwide Soy Technologies LLC, Southern Agronomic Resources LLC and now Arkansas SoyEnergy Group LLC.

Jon Hornbeck is pleased and somewhat surprised by the feedback he's received from farmers. "Local farmers have a very keen interest in buying the pure B100," he says. To his surprise, older farmers, whom he expected to be slower to adopt the new fuel, have been the most interested in burning the pure biodiesel while younger farmers are more hesitant. "I personally wish they'd work their way into [using B100] slowly," Hornbeck says, adding that Arkansas SoyEnergy will be educating local farmers about the use of biodiesel and the importance of carefully monitoring fuel filters and pumps when they first start using the fuel. Hornbeck expects to sell B100 to area farmers once the plant is operating and a local fuel supplier will purchase the renewable fuel for blending. "We probably burn from 10 [million] to 15 million gallons of diesel in this county each year-that's just agricultural only and not truck fuel," Hornbeck says.

"We're going to be the first plant in Arkansas to take the soybean from the farmer's field and put biodiesel in the farmer's fuel tanks," says Terry McCullars, general manager of Arkansas SoyEnergy. Arkansas has two other biodiesel producers including Patriot Biofuels Inc., which produces 3 MMgy in Stuttgart, and Future Fuel Corp., which produces 24 MMgy in Batesville. Arkansas SoyEnergy's $9 million facility will crush around 2.5 million bushels of soybeans and produce 3 million to 3.5 million gallons of raw soybean oil annually. The soybeans will be dehulled prior to crushing and the hulls sold in the cattle feed market. McCullar explains that the dehulled soybeans produce a higher protein (nearly 50 percent) meal coproduct, which the company expects to sell to area fish and poultry producers.

The crushing facility completed this summer includes 360,000 bushels of grain storage and a tank farm consisting of six 25,000 gallon tanks for storing raw soybean oil and biodiesel. With the crushing plant ready to crush this year's harvest, work continues on the biodiesel plant, which is scheduled for completion in December. A laboratory will be housed in the plant to monitor the process and make sure the biofuel meets BQ9000 accreditation.

The 7.5 MMgy biodiesel plant was designed by Argentine-based Bionerg. The Hornbecks toured a Bionerg facility when they visited winter research plots in Argentina. The biodiesel plant production capacity will be nearly double the initial crushing facility capacity. Hornbeck plans to expand the crushing capacity by adding more expellers and presses. In the meantime, he's constantly fielding questions about why they aren't building a bigger plant. "My answer is I don't need a bigger plant," he says. "I'm trying to take care of my area. I'll let the big multi-million [gallon] plants take care of the rest of the country, my focus is local. My plant can consume a great deal of the soybeans in my area and I can supply the majority of the fuel in my area."

Plus, a bigger plant would require the Hornbecks to haul soybeans in from a greater distance. "We're at the capacity we need to be at," he says. "If we increase the plant size very much more we're going to have to haul grain in from a larger area. If you haul beans in from a 200-mile radius, you'll out-price yourself with freight charges."

Hornbeck sees the crushing facility and biodiesel plant as adding an important new market for local farmers. DeWitt is located in Arkansas County in southeastern Arkansas-flat, fertile land of the Mississippi Delta where rice and soybeans are the dominant crops. However, the DeWitt area is landlocked, with no railroad or river access. Soybean prices here are based on Chicago Board of Trade (CBOT) price quotes minus the basis, a term referring to the difference between CBOT futures market and the local cash price that reflects transportation costs and local demand. "Local elevators are anywhere from 50 cents to $1 under the board, which is a lot," Hornbeck says. Arkansas SoyEnergy's goal is to narrow the basis by about half, "not as a competitive move, but trying to get the farmers a little more money for their crops."

Developing Seed Varieties
The Hornbecks also see an opportunity for their soybean breeding business, Worldwide Soy Technologies. "We run several thousand soybean varieties a year through our research facilities," Hornbeck says. "We've always focused on high protein content. When this project came up we began looking at the oil." Two varieties show promise for producing 2 percent to 3 percent more oil than other varieties while maintaining good yields. The company may contract with farmers to grow the new varieties for the biodiesel plant. "It's not a drastic increase in oil, but any little bit helps," he says.

The brothers are also experimenting with canola. "It's a winter crop that we can grow like winter wheat," Hornbeck explains. Compared with the area's dominant crops of rice and soybeans, canola is a low input crop that requires equipment similar to wheat. Canola's oil content is double that of soybeans and Hornbeck sees it as a good supplement to soybeans to supply the plant. The Hornbecks learned several things when they planted their first canola crop last fall. Chemical residues from previous crops caused problems with stand establishment, and aphids weren't caught in time to prevent damage. They aim to improve the 1,100-pound-per-acre yield next year. If the crop continues to look promising, the Hornbecks' research and seed companies may add canola to their list of crops.

Complete Package
Looking ahead, the Hornbeck Agricultural Group may offer package deals to their farmer customers. Farmers can buy seed, have the crop monitored, receive help with bookkeeping, sell the grain to the crushing facility and buy the biodiesel to fuel their equipment. "We'll tie the package together and farmers who use all of our services will get a discount."

The real benefit, though, will be to the local community, Hornbeck says. "We're not going to adversely affect farmers because we're farmers ourselves," he says. "We look at it as another source for local farmers to deliver their crop and hopefully make a little more money on their grain. Then we turn around and make the B100 and sell it back to them, hopefully at a discounted price." Also, as their business grows, the brothers will add jobs and contribute money to the local economy. The benefits provided by the Hornbecks haven't been overlooked by the local farmers. "I don't know how many farmers have told me, 'I wouldn't mind paying 5 or 10 cents more per gallon [for their fuel]. I know it's supporting my business and you're buying my beans. It's worth that to me.'"

Susanne Retka Schill is a Biodiesel Magazine staff writer. Reach her at [email protected] or (701) 746-8385.
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