Executives of two western Kentucky biofuels businesses – one a relative newcomer, the other just beginning production – described an industry experiencing growing pains largely as a result of the rising costs of raw materials.

Both Mick Henderson, general manager of Commonwealth Agri-Energy, which operates an ethanol production plant in Hopkinsville, and John Wright, vice president of Owensboro Grain, which built a biodiesel production plant, feel their businesses are well positioned to profit in the emerging industry.

Agriculture Commissioner Richie Farmer pledged KDA support for Kentucky’s biofuels industry. The Commissioner, president of the Southern Association of State Departments of Agriculture, said he will push for farm policies that support “25 X ’25” – the goal of generating 25 percent of the nation’s energy from renewable resources by 2025. “Burning fuel from renewable resources cuts vehicle emissions, plus it reduces our country’s dependence on foreign sources of energy,” he said.  “At the same time,” the Commissioner noted, “we must balance the needs of our biofuels industry with those of our livestock producers, who need to keep their production costs in line.”

Henderson said in July 2007 the high price of corn had stalled the expansion of the ethanol industry both nationwide and locally. Corn prices were in the mid- to upper $3-per-bushel range in the fall of 2007. Henderson expected a big 2007 corn crop in Kentucky, and the October production forecast was 11 percent higher than the 2006 crop because of a significant increase in corn acreage.  Wright said the biodiesel industry is under similar pressure from the high price of soybean oil. “It hasn’t changed our business model any. We are a vertically integrated soybean processor,” Wright explained. “I feel for those who are not vertically integrated.”

Henderson said Commonwealth Agri-Energy, which has an annual production capacity of 33 million gallons of ethanol a year, is prepared to grow when the time is right. “We know what we want to do,” he said. “We’re ready to pull the trigger if the economics play out.”  Commonwealth Agri-Energy is looking to develop markets to the south, including Nashville, and regain market share in western Kentucky. “All those cities of moderate size in western Kentucky should be on 10 percent ethanol from this plant based on price,” Henderson said. “The problem is these decisions aren’t necessarily economic alone.”

The Owensboro Grain biodiesel plant has a production capacity of 50 million gallons a year, making it one of the largest biodiesel plants in the country.  “The biofuels industry continues to change, and it’s going to continue to change every day,” Wright said.  “We have to be nimble and respond to the changes.”