Proving the Collocation Concept

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High-priced feedstocks and tight margins are the topic of conversation among many in the biodiesel industry. It would seem that few new producers are willing to clear such daunting hurdles as indicated in this issue's Proposed Biodiesel Plant List: 2008. This year's list includes 27 proposed projects, compared with 94 last year. One notable exception is the Producer's Choice Soy Energy project in Moberly, Mo.

The Producer's Choice project is unique. Not because construction on the project continues when so many plants are operating at reduced capacity or shutting down. Not because they were able to obtain financing, or because they are locally-owned. While those are good reasons to sit up and take notice of this project, there is something about this project that's even more intriguing. The most innovative and unique aspect of this project involves something many producers have talked about but few have attempted except for large companies such as Cargill Inc. and Archer Daniels Midland Co. Producer's Choice is building a soybean crushing facility collocated with a biodiesel plant and will be able to retain total control over the entire production process.

Process Concepts, a design/build company in Pevely, Mo., has been involved with the project from the very beginning. Company Vice President Chris Hill believes it's the first locally owned crush/biodiesel production facility in the Midwest. "I don't know of any others," he says. "The exception would be some of your big players like ADM and Cargill. They, obviously, locate their production plants next to extraction plants. But for a regional, privately owned entity like this, it's the only one I know of."

Process Concepts has experience building biodiesel plants. The company worked as general contractor for the construction of Natural Biodiesel in Hayti, Mo., Great Rivers Soy in Lilbourn, Mo., and Global Fuels in Dexter, Mo. The company has also done piping work on two other Missouri biodiesel plants, but this is their first crush facility, according to Hill. It's been a learning process. "We've aligned ourselves with some really good people in the industry," he says. "And we plan to build a lot more crush plants in the future." When the Producer's Choice project is finished, Hill says they expect to use it as a showpiece for other groups interested in building crush/ production facilities. "It won't matter whether they use soybeans or canola or sunflowers," he says. "These plants are easily adaptable to whatever type of agricultural community they would be built in."

The idea to build a locally-owned project with a soybean crushing facility and a biodiesel production facility was brought to Process Concepts by Jim Beckley, chairman of the board at Producer's Choice. "They found out about our company and were interested in value-added products for farmers in their regional group in north-central Missouri," Hill says. "We took their ideas and started coming up with a solution so that we could build their plant for them." Process Concepts acted as consultants and helped determine the size and location of the plants, return on investment estimates, costs and other budgetary information.

Producer's Choice raised the money for the project by hiring a marketing expert and then held investment meetings in counties near Moberly, Hill says. "We attended many of those investment meetings and did presentations, explaining what our concept of the plant was," he says. By the time Producer's Choice finished its fundraising efforts, the group had raised more than $7 million from approximately 300 investors. According to Hill, 85 percent of Producer's Choice investors are farmers. "The appeal to them is they suddenly [have] an outlet that they are part owners in, where they can take their agriculture products and sell them to their own organization," he says.

Location, Location, Location
The plant site is in Randolph County in the heart of Missouri's soybean belt. "There are about 30 million bushels of soybeans raised per year in Randolph and the surrounding counties," Hill says. He adds that Moberly city officials were helpful in making the decision to locate the Producer's Choice plant near the community of 8,000 by agreeing to provide road infrastructure and other assistance vital to the construction of this type of a facility. In return, Producer's Choice will provide approximately 20 "nice, permanent jobs for the community," he says.

Construction of the facilities began in March. At press time, Hill told Biodiesel Magazine that the engineering process was mostly complete and that they were going full speed into the construction phase. Although the start of construction was slowed because of spring flooding in that area of the state, they remain on schedule. The 10 MMgy biodiesel production plant is expected to begin operating by March and the 300-ton per day soybean crushing facility should be complete in April. The total cost of the project is $16 million, with each plant accounting for about half of the cost, Hill says.

State-of-the-art equipment will be installed in each facility. The crush facility will be a mechanical extraction plant, as opposed to a solvent extraction plant. "ADM, Cargill, Bunge, Ag Processing … these companies use solvent extraction plants," Hill says. "[They] do extract more oil out of the soybeans, but they are also very large scale, very expensive and potentially hazardous." In comparison, Hill says mechanical extraction facilities don't use hexane, a hazardous air pollutant, to extract oil from the soybean, which means there are fewer risks. Also, the mechanical method, which is basically a very large press used to squeeze oil from the soybeans, while it doesn't extract as much oil as the solvent method, yields a high-value soy meal. Soy meal from mechanical extraction plants is in great demand and can be sold for a premium price, which plays into Producer's Choice plan to stay profitable, he says.

Hill compliments the foresight of the Producer's Choice board in seeking customers for the soy meal before the oil extraction plant is built. "They have a good game plan," he says. Board members contacted some of the many poultry, dairy cattle and swine producers in the region who would be interested in a higher-value feed product for their animals. They now have clients committed to buying soy meal at the market price rather than at discounted rates. That's the nice thing about collocating a crush facility with a biodiesel production plant, Hill says. "Biodiesel producers are concerned with 15 percent of the soybean, and it's expensive," he says. By operating a crush facility as well, the owners can take advantage of 100 percent of the soybean and its products.

Even though it will be located in soybean country, the Producer's Choice biodiesel facility is being built so that it can process multiple feedstocks, which is another important aspect
that should lead to the project's success. According to Hill, SRS Engineering Corp. has provided the technology to equip the plant with an esterification unit to allow the use of low-cost, high free fatty acid feedstocks. Once it's running at capacity, soy oil will account for only 60 percent of the feedstocks used. The facility will also feature touch-screen controls and a state-of-the-art methanol recovery system which will produce marketable glycerin. "We're going high-end on everything," Hill says.

While the project is being handled as one unit for construction purposes, once the plants are operating each plant will be financially independently, Hill says. "They each have to
stand on their own two feet, but one helps hedge against the other," he says. That's the general idea of collocating crush facilities with biodiesel plants. When soybean prices are high (trading at $15 per bushel at press time, according to Hill) soybean farmers make larger profits from their crops. At times of low agriculture prices, the biodiesel plants will become the larger money-makers.

It all comes down to flexibility. The biodiesel plants of the future are those that are able to handle more than one feedstock and have various sources of revenue. The Producer's Choice facilities cover all the bases. Hill says the crush facility will be equipped with a de-gumming/refining unit that not only makes crude soy oil biodiesel-ready, but it also allows the facility to easily expand its operations to produce food-grade oil. "They have options there outside of straight biodiesel-ready oil," he says. "If [Producer's Choice] ever elects to, the plants can operate independently so that they can produce food-grade oil from the crushing plant and, with the flexibility in the biodiesel plant, operate with lower-cost high free fatty acid feedstocks. They can make operating decisions a little differently than most biodiesel or stand-alone crush plants. They have many options."

Kris Bevill is a Biodiesel Magazine staff writer. Reach her at [email protected] or (701) 373-8044.