Someone once told me that Mississippi is a club, not a state. I'm not sure whether that's good or bad or accurate. I can truthfully say that I have never met anyone from Mississippi that I didn't or don't like, so I hope any Mississippians reading this will take it in the spirit it is intended.
Now that a tank of gas can require a bank loan, it seems the concept of alternative fuels has regained some energy of its own. Modern technology can now get about three gallons of ethanol from a bushel of corn, and as a byproduct, about 17 pounds of distillers grain, which I'm told is ideal for livestock feed.
Though agriculture as an industry has many virtues, developing a lasting infrastructure for doing business has not been one of them. Enter the hallmarks of infrastructure, the U.S. automotive industry. GM and Ford have been in the forefront recently in promoting the green movement in cars. No less an American icon than Kermit the Frog has been plugging away on TV commercials for going green.
Of course, the real green that Ford and GM are interested in isn't the environment, ethanol or biodiesel. The U.S. auto industry is fighting for its economic life, and as we all know, desperate people often do desperate things — like the automotive industry helping agriculture.
Ford and GM are now interested in alternative fuels for their gas guzzling SUV's and other cars that are generally less fuel efficient than their foreign competitors. Clearly, there is an opportunity for automotive and agriculture industries to strike a blow for self sufficiency. The best bet being from production of ethanol from corn and biodiesel from soybeans.
A medium-sized ethanol plant these days can produce 20-25 million gallons of ethanol a year. If operating at maximum efficiency, such a plant would require roughly eight million bushels of corn. At a hundred bushels per acre, 80,000 acres of corn — give or take a few thousand acres, would be needed to supply the raw material for such an ethanol plant.
At $2 per gallon, the 80,000 acres of corn would produce $40-50 million in revenue — just from ethanol sales. The 80,000 acres of corn would also produce 68 million tons of grain, and even at a dollar a ton, that's another $68 million. Math is not my thing, but it seems to me that would produce over a hundred million dollars in annual revenue.
At the going price for corn of about $2.80 per bushel, that 80,000 acres of corn would be worth roughly $22.5 million, compared to $100 to $110 million for ethanol production. Surely from the extra $75-80 million in value from ethanol production, the American farmer could squeeze out an extra dollar a bushel for his corn. If you're a corn grower and would sell all the corn you can grow for $3.80 a bushel, raise your hand. The $70-plus million left over seems reasonable enough to me for distillers, distributors and retailers to make a nice profit on ethanol and distillers grain.
It has been reported (Wall Street Journal) that the state, or club, of Mississippi offered Kia and its parent company Hyundai, $1 billion to construct a $1.4 billion dollar Kia plant in the northern part of the state. That works out to about $140,000 for each job the Korean auto maker would create to operate the plant. Again, I'm a simple scribe, but it doesn't sound like good economic strategy to me.
Good or bad, the Kia plant was awarded to LaGrange, Ga., — actually West Point, Ga., to be geographically correct. The Koreans went for less incentive money from Georgia to be within 75 miles or so of their biggest U.S. plant in Montgomery, Ala‥
Unfortunately, some Hyundai officials got caught with their proverbial hands in the cookie jar, bribing Korean officials for trade incentives, so ground-breaking for the new plant in Georgia has been delayed. As is part of their business culture, the Korean automotive company vowed to give $1 billion to U.S. charities to admit guilt and as a good faith gesture that they will be good business partners.
Here's my idea. Mississippi has a billion dollars and Kia has a billion dollars, why not invest that money in building ethanol plants in Mississippi. I don't know how much gasoline Mississippians use, but I'm sure they pay more than $2 a gallon for it. Conservatively, $2 billion could build eight ethanol plants in the state and these facilities could produce 160-170 million gallons of home grown fuel annually — at $2 per gallon. In my utopian enterprise, 1,000 acres of corn, at 100 bushels per acre, would generate roughly $3.8 million.
My economist friends, well colleagues, tell me farm revenue has a pull through ratio of about 7:1, so that would generate $25 million or so in economic value for the state. And, it would take 80 of these 1,000 acre enterprises to provide the raw material for one ethanol plant. Too much math for me, but suffice to say it would create a lot of money for Mississippi.
Mississippi currently produces about 500,000 acres of corn annually, so by increasing production 30 percent, the state could produce the 650,000 acres or so to meet the needs of eight medium-sized ethanol plants.
Mississippi currently has roughly 25,000 dairy cattle, 95,000 beef cattle and 61,000 hogs. Total livestock production is in the neighborhood of 200,000 per year (not counting chickens, which don't usually get fed corn). Ethanol from the eight plants would produce enough grain to feed each animal approximately 5,000 pounds of feed per year. Clearly, the Club would be self sufficient on grain and would need to export some grain to neighboring states.
In a matter of years, Kia and Hyundai could stand shoulder to shoulder with Ford and GM in saving the U.S. automotive industry and Mississippi could be the most progressive club or state in America.
I don't know about the economics, the value of distiller's grain for example, but the concept is not new. To see how it works look to the south, way to the south — Brazil is now over 90 percent self sufficient on fuel, primarily ethanol from corn and biodiesel from soybeans. All it takes is vision, cooperation, infrastructure, and oh yes, lots of money.
e-mail: [email protected]