Tri-State Neighbor: South Dakota Farm Newspaper

With fuel prices soaring and commodity markets fluctuating daily, a group of producers decided to develop multiple ways to market their oilseed crops close to home.

Midwest Biodiesel Producers in Alexandria, S.D., recently changed their business plan, focus and name.

As Hanson County Oil Producers, LLC, they are in the process of building a multi-crush facility and updating their current biodiesel plant to a multi-feedstock plant that can produce the renewable fuel from a variety of oilseed crops and animal fat products.

“If you are not able to produce your own oil, you are at the mercy of the market - that is how we are right now,” said Paul Iburg, chairman of the board for Hanson County Oil Producers, LLC. “We made the change because we wanted to do two things - change our plant so we can produce biodiesel out of any kind of oil and put in a crush facility so we can make our own oil.”

A soybean farmer and biodiesel entrepreneur who grew up and farms in the Alexandria area, Iburg says the new and updated facilities bring several advantages to area producers.

“No. 1 this opens up the markets so that farmers can plant other crops than soybeans, giving farmers different crop alternatives. We can crush sunflowers, canola, camilena and give livestock producers close access to the soybean meal,” Iburg said.

Opening the door to multiple oilseed crops not only reduces market risk, but provides area producers with multiple revenue opportunities says Brian Stork, chief executive officer of Hanson County Oil Producers, LLC.

“They have designed their own system that is very unique and diversified. By doing this they have taken some of the risk out of the marketplace,” Stork said. “It actually gives diversity in the marketplace so if one oilseed is high in the marketplace we sell it to the vegetable market. We can use another oilseed for biodiesel.

“As the markets change we are not tied to high demand for soybeans. It gives local farmers diversity in the local market because they have a place to sell multiple oilseed crops locally,” he said.

Flexibility is the key to success in the biodiesel industry, according to Jon Van Gerpen, department head of biological and agriculture engineering at the University of Idaho in Moscow, Idaho.

“People are getting smarter. They are recognizing that flexibility is essential,” Van Gerpen said. “The approach they are taking is somewhat unique in that it won't be tied to an oilseed.”

Lewis Bainbridge farms with his sons, Matthew and Neal, west of Alexandria near Ethan, S.D. He says that with today's fuel prices, a local crush plant and a local source of soybean meal and biodiesel will have a big impact on their farm's bottom line.

“I grow soybeans, so historically I pay the freight to haul them to the crush facility which is 150 miles. Since I'm also a livestock producer, I pay freight on shipping the meal back. By having the facility locally, there will be minimum freight involved,” Bainbridge said. “Our hope is we can save a lot on freight and pay more for the products. When we do produce biodiesel, it will be sold locally and we'll crush a lot of soybeans. We have a lot of livestock production in the area so we'll have the ability to market that locally as well.”

Bainbridge is also excited about the new opportunities Hanson County Oil Producers, LLC provides to the next generation of farmers - like his sons. Bainbridge compares this opportunity to the ethanol industry that he says he and his wife are happy they invested in a few years ago.

“It gives opportunities to younger farmers to do something that is a little outside of purely raising corn and soybeans. The opportunity to diversify their portfolio from the start,” Bainbridge said. “Land costs are so huge and the cost of farming is incredible, so if they have some side projects to add income to family living that is a good thing.”

Bainbridge says he has always grown a diversity of crops to reduce weather-related risk. Access to a local multi-crush facility may allow other area farmers to do the same.

“Mother Nature is in charge so I know I can't hang my hat on Roundup Ready,” Bainbridge said. “We usually have a diverse crop rotation - we are heavy into corn and soybeans, but also plant peas, sunflowers, camelina and milo so we aren't locked into the corn and bean thing.”

Bigger is not always better

What Hanson County Oil Producers, LLC is developing is unique. As far as they know, they are the first to build a small multi-crush facility in coordination with a multi-feedstock biodiesel plant.

“No one has done this before. We don't have a lot of things that we can pull up as far as drawings or history. We are setting a standard,” Stork said. “We are setting it in a small scale which is unusual for the industry. We are taking a strong business plan, and putting that to work in a full-scale plant.”

According to Lance Koth , the Mitchell, S.D., branch president of First Dakota National Bank, the size of the crush and biodiesel facilities is a unique advantage that Hanson County Oil Producers, LLC has when it comes to managing their risk.

“It is a readily known fact that the renewable energy business - specifically biodiesel, is not doing really well right now. In this particular case, these individuals that put the plan together took the position that big is not always better. They are basically developing a medium to small sized crush facility and biodiesel plant,” Koth said.

He adds that the facilities are a good fit for the economic development of Alexandria, a rural farming community of about 650, located 50 miles west of Sioux Falls, S.D.

“It's an industry that fits like a glove in the area. Where they have located the plant is already designed for an elevator, a road is already there,” Koth said.

Tom Bell, chairman of an economic development group in Alexandria, agrees.

“It will make a big difference for our town. It will provide jobs for local people and bring in new families,” said Bell of the 24 full-time positions the group says it will need once Hanson County Oil Producers, LLC is up and running. “It impacts your schools and churches. Anytime in small town South Dakota that you can get more students in your school, that makes a big difference.”

When it is complete, the multi-crush plant will be capable of crushing 300 tons per day. The biodiesel plant will be a 2 million gallon plant.

Producers can learn more about Hanson County Oil Producers, LLC, by contacting Stork at (605) 239-4955.