Virginia ethanol plant put on market before production
By STEVE SZKOTAK
RICHMOND, Va. (AP) -- Virginia farmers who added thousands of acres of barley to satisfy the voracious appetite of an ethanol plant in Hopewell will not be left holding the bag now that the $150 million plant is on the market.
Perdue AgriBusiness will honor contracts with farmers and find other markets for the Virginia-grown grain, spokesman Joe Forsthoffer said Tuesday.
Osage Bio Energy said Monday it was putting the plant, Appomattox Bio Energy, on the market before it had produced a gallon of ethanol, citing unfavorable market conditions. The announcement came about one week before harvest for many barley growers.
Perdue AgriBusiness, based in Salisbury, Md., worked with Osage to line up growers for the plant, which was expected to purchase up to 30 million bushels of barley annually to make ethanol for gasoline blends. Ethanol production was to begin this month.
"We merchandise grains and commodities around the globe, so we will be able to find a home for it," Forsthoffer said. "We'll receive that grain at harvest, when they're ready to bring it in, and at a fair price."
The Osage announcement was still being assessed Tuesday by growers and the Virginia Grain Producers Association.
"The direct impact on Virginia's grain growers is still largely undetermined at this point," the association said in a statement.
The decision is a severe blow for Hopewell, which was expected to collect about $2 million annually in taxes from the plant, The Progress-Index of Petersburg reported.
David Taliaferro of Essex County's Montague Farms said his family's farm, which grows primarily corn and soybeans, grew 400 acres of barley destined for Osage.
"This ethanol is an entirely new thing," he said. "A lot of farmers increased their acres."
Next fall, Taliaferro said, "We will not put barley in the ground on speculation that someone will be there to run the plant." He credited Perdue executives for doing the right thing.
"When they make a contract with a grower, they'll stick with it," Taliaferro said. "It's a two-way thing."
Perdue's Forsthoffer wouldn't say how many acres of barley the company had under contract for barley production for confidentiality reasons, or detail contracts because the company structured various deals.
"It is a significant amount of money because we're looking at a significant amount of acres," he said.
Wade Thomason, an associate professor at Virginia Tech and grain crops specialist, said approximately 85,000 acres were devoted to barley in the state, up approximately 50 percent from 2 1/2 years ago. Barley had been declining since the 1990s more farmers turned to corn to feed their livestock.
Thomason said the question for growers centers on the uncertainty of the Osage plant's future.
"Osage had at least talked a good game about Virginia-grown grains," he said. "I think because we're covered this year, I think we're in good shape."
Molly Pugh, executive director of the grains association, said in an interview she had not heard directly from Perdue. "I would expect them to honor the contracts," she said.
Pugh said the Osage announcement poses another problem for barley growers. They still have the grain stored from the previous year.
"This plant has never been operational," she said. "These guys are still holding the 2010 crop. That's going to be the biggest issue."
Forsthoffer said some of those stored grains may be under contract for future delivery.
Pugh said her hope was that a buyer would be found for the Hopewell plant.
"Everyone who was putting barley in the ground thought it was going to Osage," she said.
Perdue AgriBusiness: www.perdueagribusiness.com
Copyright 2011 The Associated Press.