Our disciplined risk management strategy is designed to lock in operating margins by forward contracting the primary commodities involved in or derived from ethanol production: corn, natural gas, ethanol and distillers grains, along with the corn oil extracted prior to the production of distillers grains.
We also seek to maintain an environment of continuous operational improvement to increase our efficiency and effectiveness as a low-cost producer of ethanol.
We review our operations within the following four separate operating segments:
We operate 17 ethanol plants in Indiana, Illinois, Iowa, Michigan, Minnesota, Nebraska, Tennessee, Texas, and Virginia, with approximately 1.5 billion gallons annually of total ethanol production capacity. At capacity, these plants collectively will consume approximately 14 million tons of corn and produce approximately 4.1 million tons of distillers grains annually.
Corn Oil Production
We operate corn oil extraction systems at all of our ethanol plants, with the capacity to produce approximately 343 million pounds annually. The corn oil systems are designed to extract non-edible corn oil from the whole stillage process immediately prior to production of distillers grains. Industrial uses for corn oil include feedstock for biodiesel, livestock feed additives, rubber substitutes, rust preventatives, inks, textiles, soaps and insecticides.
Marketing and Distribution
Our in-house marketing business is responsible for the sales, marketing and distribution of all ethanol, distillers grains and corn oil produced at our ethanol plants. We also market and distribute ethanol for a third-party ethanol producer.
Our grain storage is a combination of five owned and operated grain elevators combined with the grain storage located at our ethanol plants, totaling 58 million bushels of storage capacity. We buy bulk grain, primarily corn and soybeans, from area producers and market grain to other grain processors including our ethanol production segment.
OUR GROWTH STRATEGY
We intend to continue to take a disciplined approach in evaluating new opportunities related to potential acquisition of additional ethanol plants by considering whether the plants fit within the design, engineering and geographic criteria we have developed. We also plan to continue to grow our downstream access to customers and are actively seeking new marketing opportunities with other ethanol producers. Additionally, we are a partner in a joint venture, BioProcess Algae LLC, formed to commercialize advanced photo-bioreactor technologies for the growing and harvesting of algal biomass.
OUR COMPETITIVE STRENGTHS
We believe we have created an efficient platform with diversified revenues and income streams. Fundamentally, we focus on managing commodity price risks, improving operating efficiencies and optimizing market opportunities. We believe our competitive strengths include:
Disciplined Risk Management
We believe risk management is a core competency of ours. Our primary focus is to lock in favorable operating margins whenever possible. We do not speculate on general price movements by taking significant unhedged positions on commodities such as corn, ethanol or natural gas. Our comprehensive risk management platform allows us to monitor real-time commodity price risk exposure at each of our plants, and to respond quickly to lock in acceptable margins or to temporarily reduce production levels at our ethanol plants during periods of compressed margins. By using a variety of risk management tools and hedging strategies, including our internally-developed real-time operating margin management system, we believe we are able to maintain a disciplined approach to risk management.
Focus on Operational Excellence
All of our plants are staffed by experienced industry personnel. We focus on continuous incremental operational improvements to enhance overall production efficiencies, and we share operational knowledge across our plants. Using real-time production data and control systems, we continually monitor our plants in an effort to optimize performance. We believe our ability to improve operating efficiencies provides an operating cost advantage over most of our competitors. In turn, we believe we are well positioned to increase operating margins for any facilities that we may acquire in the future.
Proven Management Team
Our senior management team averages approximately 25 years of commodity risk management and related industry experience. We have specific expertise across all aspects of the ethanol supply, production, and distribution chain – from agribusiness, to plant operations and management, to commodity markets and risk management, to ethanol marketing and distribution. We believe the level of operational and financial expertise of our management team will prove critical in successfully executing our business strategies.
Demonstrated Acquisition and Integration Capabilities
We believe U.S. ethanol production capacity is poised for further consolidation and have demonstrated the ability to make strategic acquisitions that we believe create synergies within our vertically integrated platform and enhance our ability to mitigate risks. Our balance sheet allows us to be opportunistic in that process. Since our inception, we have acquired or developed 17 ethanol plants in addition to upstream grain handling and storage businesses, a cattle-feeding operation and downstream terminal and distribution services. We have corn oil extraction technology at all of our ethanol plants to generate incremental returns from this value-added product. We believe such acquisitions, developments and improvements have been successfully integrated into our business and have enhanced our overall returns.
Leading Vertically Integrated Ethanol Producer
We believe our operations throughout the ethanol value chain reduce our commodity and operating risks, and increase our pricing visibility and influence in key markets. Combined, we believe our agribusiness, ethanol production, corn oil production, and marketing and distribution segments provide efficiencies across the ethanol value chain, from grain procurement to blending fuel. Our agribusiness operations help to reduce our supply risk by providing grain handling and storage capabilities. Using our logistical capabilities and expertise, we market and distribute ethanol, distillers grains, corn oil and other commodity products. Our corn oil systems are designed to extract non-edible corn oil that has multiple industrial uses. Our fuel terminals allow us to source, store, blend and distribute ethanol and biodiesel across multiple states.