Comparative Analysis of Origin vs. Destination Ethanol Plants
Charles Sauerwein, Cimarron, Kans. Defended his thesis, “Comparative Analysis of Origin vs. Destination Ethanol Plants,” Thursday, April 26, 2007. Sauerwein is a Grain Merchandiser for WindRiver Grain in Garden City, Kans. He graduated from Kansas State University in May with a Master’s in Agribusiness (MAB).
With the explosion of ethanol plants in the United States, more facilities are being built closer to livestock feedyards in order to use the distiller’s grain co-products as feed. Sauerwein’s thesis examines the cost - price relationships between a destination plant located in Southwest Kansas and those ethanol plants located closer to lower cost feed grain supplies in Nebraska and Iowa referred to as origin plants to determine whether a destination ethanol plant can effectively compete with an origin plant.
Dr. Mike Woolverton, Agricultural Economics professor and Sauerwein’s thesis advisor, said, “Charlie looked at the competitiveness of Western Kansas destination ethanol plants where grain is shipped to in comparison to origin ethanol plants in which grain is purchased locally as are found in Iowa and Nebraska.
Sauerwein’s research concluded that a Western Kansas ethanol plant could be competitive given the right conditions. “A plant could be competitive if: 1) they also purchased locally grown KS grain sorghum to blend into corn brought from long distance to make ethanol; 2) they negotiated good transportation rates; and 3) the distiller’s grains were fed wet in Western KS feed yards or dairies in order to save on energy costs needed to dry the DGS. His findings are important because he showed that Western KS ethanol plants can be viable business propositions and can also support Western KS livestock feeding operations,” Woolverton said.
These findings may have a big impact for Sauerwein and WindRiver Grain, but also for the entire agricultural industry in Western Kansas as the ethanol industry continues to develop. “After completing this research, I now have a much greater understanding of the timely issues that affect ethanol plant competitiveness. This will have direct application to our own company’s business model,” Sauerwein said.
