February 16, 2009

As the US ethanol industry sputters, more plants are turning to sorghum as a cheaper - but producers say equally efficient - alternative to corn-based ethanol.

 

The shift is mostly occurring in Central and Southern Plains states where sorghum is prevalent, such as Kansas and Texas, observers say. Producers have been lured to switch by sorghum's increasingly cheap price compared to corn.

 

"You have to try it, as far as we're concerned," said Sandra Reed, interim manager of a plant operated by Nesika Energy LLC in Scandia, Kan.

 

Her plant has been in operation for 11 months, and until the beginning of November used only corn. Now the plant is exclusively using sorghum.

 

Officials say that most ethanol plants in Kansas, the country's biggest sorghum producer, are also relying on sorghum. Earlier this week, the US Department of Agriculture noted the shift in its monthly supply and demand report, increasing projected sorghum use for food, seed and industrial use to 110 million bushels, up 40 million bushels from the previous month and up 75 million bushels from the previous year.

 

Like the sorghum crop itself, sorghum-based ethanol production is still a fraction of corn-based ethanol production, which will be a projected 3.6 billion bushels in 2008-09, according to the USDA. But officials say the sorghum market could continue to grow as long as it remains at a discount to corn.

 

Sorghum is a feed crop typically grown on marginal lands, an agronomist said. It performs well in adverse conditions that may not support corn or other crops, but it also doesn't have as much upside potential as corn. Total sorghum production for 2008-09 is projected at 472 million bushels, compared to 12.101 billion for corn.

 

For ethanol plants, the differences between sorghum and corn are negligible and the goal is the same - turning starch to sugar and then into ethanol.

 

"It's a perfect substitute," said Chris Cogburn, strategic business director for the National Sorghum Growers Association. "All you're doing is looking for starch."

 

Plants that use both corn and sorghum can seamlessly transition from one to the other without significant changes to equipment or infrastructure, officials said. Reed said that with sorghum the plant has to change filtering screens from time to time but that ultimately using sorghum is at least as easy as corn. Officials said the enzymes used to make sorghum-based ethanol are different.

 

An official at a Nebraska ethanol plant that uses both corn and sorghum, also called milo, says they don't have to segregate the grains.

 

"If we're bringing in corn and milo it all goes into the same bin," she said.

 

She said the plant relied on corn exclusively until September, when the discount for milo to corn grew to between 30 and 50 cents. The plant is now using sorghum, which it gets from northern Kansas, almost exclusively.

 

Using sorghum has no effect on the amount of fuel produced, officials said.

 

"We're very pleased with the results," Nesika Energy's Reed said. "Are we suffering yield? We don't feel that we are."

 

Ethanol producers also make money by selling a byproduct, distiller grains, which is used for feed. It is not as aesthetically pleasing coming from sorghum as it is from corn, but it performs just as well and has not prompted a single complaint from livestock producers, Reed added.

 

But the increased use of sorghum doesn't signal a significant, long-term shift away from corn-based ethanol, and ethanol is not likely to rewrite the rules for the sorghum market the way it did for corn, officials said.

 

Kraig Roozeboom, Kansas State University Extension Agronomist, said there is potential for more sorghum-based ethanol, "but honestly, if you look at total production, corn is going to dominate those markets."

 

"Sorghum has a very similar niche in terms what it brings to feed and ethanol," he added.

 

Roozeboom said that prime land will continue to be used for corn and that "even sorghum growers would rather grow corn if they could." Managing corn is simpler, particularly with regard to weed control, he said.

 

Given the poor economy and margins for producers, expansion is the furthest thing from their minds, the National Sorghum Growers Association's Cogburn said. But the increase in plants in Texas and Kansas that are taking sorghum is good for the market in the long run, he said.

 

Prices for all grains have plunged during the past year, but a disintegration of export demand for sorghum has made it even cheaper when compared with corn. New NAFTA rules eliminating restrictions on corn imports for Mexico has led that nation to import more corn at the expense of sorghum, officials said.

 

Cogburn said ethanol is providing sorghum with "a higher value" market when it really needs it. Ethanol producers will bid up prices more than livestock feeders if they need to, he said.

 

"If we didn't have the ethanol demand, we'd be much worse than we are now," Cogburn said. "It's providing a floor for us, which has been really nice."