Ethanol production helping rural communities

At the end of this year, VeraSun Energy Corp., based in South Dakota, will be producing 1.64 billion gallons of ethanol, making it the nation's leading ethanol producer.

For Don Endres, VeraSun chief executive officer, what's important isn't the fact the VeraSun is the nation's leading ethanol producer.

"We want to be relevant to our customers and a reliable supplier to them and it's very important that we have size and scale," Endres said.

Endres will be in Albion Thursday for the ribbon-cutting ceremony and open house for its VeraSun Albion 110 million-gallon-per-year ethanol plant.

The plant began production in October 2007 and was acquired by VeraSun from ASAlliances in July 2007. The plant is one of 11 VeraSun ethanol production facilities currently in operation.

The Albion plant will annually process about 39 million bushels of corn to produce 350,000 tons of distillers grains for livestock feed, in addition to 110 MMGY of ethanol.

VeraSun also owns ethanol plants in Ord and Central City.

Endres said the continuing expansion of VeraSun is helping the company to acheive a better economy of scale and reduce its costs of ethanol production.

"We are able to utilize a much larger team to help to improve and refine our business over time by increasing the number of gallons we produce over time and reduce conversion costs," he said.

As head of VeraSun, which is listed on the New York Stock Exchange, Endres has more than 20 years of experience in building, operating and managing successful businesses.

In 1985, he founded Special Teams, Inc. During his tenure as president and general manager, Special Teams was recognized by Inc. Magazine as one of the fastest growing privately held companies in the U.S. in both 1994 and 1995. After Special Teams was sold to American Express in 1995, Endres assumed the role of President of American Express Special Teams.

In 1999, Endres became a principal investor and board member of VeraSun.

While the ethanol industry has dramatically grown over the last five years and will be able to produce nearly 9.5 billion gallons of ethanol by the end of this year, it has also increased the demand for corn.

Corn prices have seen a dramatic rise from $2 per bushel in 2006 to $6 per bushel earlier this year.

Ethanol provides the only viable alternative to fossil fuel gasoline nowadays. But while Endres said people's focus are higher corn prices, what they need to focus on is the differential between the price of corn and the price of ethanol.

"Over time, the price of ethanol has significantly increased as well," Endres said.

But because of improved efficiencies, he said VeraSun continues to be profitable as the company generated $32 million in cash the first quarter of this year, which was 10 times the amount it generated in the first quarter of last year.

"We grew our top line of revenue by 257 percent over the first quarter of 2007 and generated revenues of $516 million," Endres said. "Even though the margin per gallon may be a bit less, we are producing so many more gallons, which generates a significant amount of income."

He said by continuing to grow VeraSun, it also helps the economies in those small communities, such as Ord, Central City and Albion, where they are located.

According to the Nebraska Public Power District, a 100 million-gallon-per-year ethanol production facility similar to the one in Albion, adds 168 new jobs and generates $31.7 million in new value added economic activity to the local economy.

Overall, more than $3 million in state tax revenues and almost $3 million in local tax revenues will be generated annually and shared among city and county governments for community improvements.

"We continue to spend a lot of time and effort to improve our business and we know it's important not only for our shareholders, but also for our employees and communities that we operate in," Endres said.

As the biofuel industry is providing a domestic fuel alternative to the ever-increasing amount of foreign oil being imported into the U.S., the grocery and meat industries have attacked the ethanol industry as the primarily reason why food costs have gone up.

But Endres said it's the rising costs of crude oil that's driving food costs up.

"Study after study is showing that the increase for corn for ethanol production has very little impact on commodity prices," he said. "The increase in the cost of energy has been more impactful on the cost of food than farm value."

For example, the farm value of corn for a $3 box of corn flakes is less than a nickel and for a $6 per pound piece of beef stake, corn's cost represents only about 19 cents per pound.

"Products are priced for what the market can bear and its perceived value by the buyer and not its cost," he said. "There are a number of groups that are working against us (the ethanol industry), and I think our industry is now stepping up against those attacks."

Endres said increased ethanol production is keeping gasoline costs from climbing even higher.

"We believe, when looking at this from a consumer perspective, the impact on food costs is minor and the benefit of ethanol helping this country reduce its dependence on foreign oil is really important for consumers," he said.