Companies see ‘new industry’ as they turn crop residues into livestock feed

Source: By Cole Epley / World-Herald staff writer • Posted: Wednesday, April 9, 2014

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When Russ Zeeck starts talking about corn yields, it’s only natural to assume he’s got grain on his mind.

As it turns out, though, Zeeck and his colleagues at Pellet Technology USA, a biorefinery startup in Gretna, are concerned about everything but the individual grains of corn that come from Nebraska’s top cash crop — the husks, stalks and leaves left behind after a harvest, known as corn stover.

The company, using a recently patented process, has developed feed pellets for cattle.

“We have a product that’s not been made before,” said Zeeck, chief operating officer and a member of Pellet Technology’s board of directors. The company expects results from an ongoing trial administered at University of Nebraska-Lincoln research feedlots that will establish baselines for commercialization and validate work that’s been five years in the making.

The riddle of how to convert biomass into value-added products — think ethanol and plastics derived from corn and other grains — is one that has confounded many other entrepreneurs and scientists. It’s also one with many answers that has potential for significant economic stimulation for state and rural ag-based economies, both in Nebraska and Iowa and in surrounding states.

While an agricultural startup may not be as sexy as a software startup, the importance of agricultural innovation to the Midwest economy is undeniable.

“Is there anything less exciting than cows grazing residue?” said James MacDonald, associate professor and beef cattle nutritionist in the department of animal science at the University of Nebraska-Lincoln, who has worked with Zeeck. “We’ve been doing that in Nebraska for decades, but it’s still the greatest economic opportunity we have.”

About 70 miles northeast of Pellet Technology’s $6 million research and development facility, entrepreneurs near the Iowa community of Harlan have developed similar products using similar agricultural residues but with a different process.

As Don Cordes, chief executive officer of Iowa Agricultural Bio Fibers, is quick to point out, the devil is in the details.

“Some of our biggest challenges have been figuring out how to handle this stuff,” Cordes said.

Fibrous crop residues don’t translate into a world set up to handle grain because they’re far less dense than grain and can bind up in machinery. A bushel of corn, which amounts to a little more than a cubic foot by volume, weighs 56 pounds. The same volume of agricultural residue weighs only four pounds.

“If you use an auger wrong when you handle it, you end up making rope,” Cordes said.

Cordes’ company has also identified livestock as a solid market and has formulated feed for cattle, sheep, goats and horses.

Reid Andersen, owner of Andersen Quarter Horses in Council Bluffs, raises, sells and trains registered quarter horses. He’s been feeding his horses feed from Iowa Agricultural Bio Fibers along with hay for about five years and said it’s been great for his bottom line.

“I had some older mares that one veterinarian told me to give up on because they wouldn’t ever give birth again,” Andersen said. “I put them on this feed and I’ve got a 25-year-old at the University of Oklahoma right now that’s getting bred.”

However different the engineering and organizational details characterizing Cordes’ and Zeeck’s operations, both companies are at the forefront of what agriculture and bioscience experts say is emerging as a new industry.

Providing readily available, low-cost feed options to livestock producers means farmers and ranchers can mitigate some of the volatility in grain-dependent feed markets.

MacDonald, the UNL associate professor, is among a contingent that has closely watched residue yields increase with corn yields over the years, and he’s sold on the potential of a new market for residues.

“Because of shifts in forage availability and corn prices and the increase in corn yield, we believe this is the greatest opportunity for beef cattle producers in Nebraska and surrounding states,” MacDonald said.

Research and development is arduous labor, however, and considerations outside of finances can stifle the velocity of any new market.

Because of zoning restrictions and the company’s will to develop a scalable production model, Pellet Technology has yet to commercialize any of its products, which also include cat litter pellets and clean energy pellets that can be burned with coal as a complementary power source.

But the company has taken pains to ensure its research and development plant at Gretna is configured to an exactness that will allow for full-scale development into the mass market.

According to company officials, that goal isn’t too far off. “Our goal is to identify and get permits approved for a facility by the fourth quarter of this year,” Zeeck said.

In late March, Pellet Technology entered into an engineering, procurement and construction agreement with Colwich, Kan.-based ICM Inc., designating the company as the exclusive contractor for Pellet Technology’s full-scale pellet plants.

The plants would be built and paid for by cooperatives that license Pellet Technology processes. With ICM, Pellet Technology has identified Nebraska, Iowa, Illinois, Kansas, Texas and California as the most viable locations for its plants.

Meanwhile, production at Iowa Agricultural Bio Fibers has been growing 35 percent annually in recent years, and the company is currently selling about 20,000 tons of feed each year. An ongoing expansion project will grow the plant’s capacity to about 75,000 tons annually by year-end.

Cordes said livestock feed markets will support its research of other products like cat litter and biofuel pellets.

As the top three corn-producing states in the nation, Iowa, Illinois and Nebraska accounted for more than 42 percent of U.S. corn production in 2013. Since a single corn plant is about 50 percent grain by weight, that means operators like Zeeck and Cordes are at ground zero for an agricultural opportunity similar to the ethanol boom.

“Ultimately, there is no reason there won’t be a number of 250,000-ton plants producing this feedstock, especially in Iowa, that will go in many different directions,” Cordes said.

Industry heavyweights like DuPont, POET LLC and Royal DSM will open cellulosic ethanol plants in Iowa this year that could rely on pelletized residue to derive renewable fuel from agricultural waste products. Technology developed in Gretna and Harlan could easily factor into the supply chain.

As Phil Kozera, executive director of the Bio Nebraska Life Sciences Association, sees things, these advances bode well not only for Nebraska and surrounding states, but also for rural economies.

Innovative uses of other agricultural byproducts have already stimulated rural economies in places like Laurel, Neb., west of Sioux City, where Laurel BioComposite LLC has spent millions of dollars on a 20,000-square-foot processing facility. The company uses a byproduct of ethanol production to produce an additive used in plastics that replaces petroleum-based materials.

“I think these are examples of the significant opportunities life sciences represents,” Kozera said.

Steve Petersen, end use market manager for St. Louis-based Monsanto Co., has already seen agricultural mainstays like John Deere get on board with the potential for residues. The equipment manufacturer has worked with other companies to develop machinery that bales corn stover as soon as it comes out of a combine.

Typically, stover is left on fields and baled at a later time.

Petersen witnessed the rural revitalization ushered in with the ethanol industry’s growth 20 years ago and said it’s only a matter of time before businesses start sprouting up to support endeavors like Iowa Agricultural Bio Fibers and Pellet Technology.

“To take something from a byproduct we just wanted to get rid of and to turn it into a really valuable co-product, that really adds value for growers in every clime,” Petersen said. “It’s the birth of a new industry.”