Terra Grain Fuels -

Ethanol firm hunts grain

Bruce Johnstone, The Leader-Post

Published: Friday, February 02, 2007

Build it and they will come, so the story goes.

But Terra Grain Fuels (TGF) isn't taking any chances that its $140-million ethanol plant at Belle Plaine won't have enough feedstock when it begins operations as planned in late 2007.

The privately held, Regina-based company is holding information meetings all over the southern part of the province this winter to round up producers to supply the 150-million-litre-a-year plant -- the largest wheat ethanol plant in North America.

TGF needs 15 million bushels a year of high-starch, feed-quality wheat and is offering producers one- and two-year fixed price contracts to supply the plant located just off the Trans-Canada Highway halfway between Regina and Moose Jaw.

In fact, TGF is offering producers cash advances of up to $75 per acre through its financial partner Conexus Credit Union to grow certain grades of wheat and deliver them to the ethanol plant.

Gary Drummond, chairman of Terra Grain Fuels, says there are several reasons the company is holding producer meetings in 28 communities, including Imperial and Bethune on Thursday.

"Feed wheat, historically, has been the product of climatic problems,'' said Drummond, a Regina lawyer who made his fortune in the natural gas business in Calgary before founding Terra Grain Fuels in early 2006. "It's milling wheat that didn't make the grade.''

But crop scientists have developed new strains of high-yielding, high-starch wheat that are lower in value, but can generate higher returns for grain producers.

"If we sign a farmer up now, then they'll be seeding specific varieties of wheat that suit our purposes. We don't need protein; we need starch.''

In fact, TGF says that producers can make good money growing "ethanol friendly'' varieties, which yield up to 35 per cent higher than other varieties.

"We think our program, on an average year in our area, will yield the farmer over $200 per acre gross. That's a figure that hasn't been attained, except for the odd specialty crop, for a long time.''

Of course, contracting supplies from local producers also reduces TGF's risk of not having sufficient feedstock at the right price when the plant comes on stream in December.

"By next year, we want to have 60 to 70 per cent of our (feedstock) requirements... under contract at a fixed price. So they'll know what price they're getting, they'll know when they're going to deliver and we'll know what we're getting.''

TGF is also offering one-year cash advances administered by Conexus to producers of $30 per acre, based on an average yield of 50 bushels per acre, or $75 per acre for two years.

"It's an interest-free loan really. It's paid back out of the first 75 per cent of their scheduled deliveries,'' Drummond said. "It's geared to allow the farmer, the producer, to lock-in some of the input costs ahead of the rush.''

Drummond said the public meetings have been successful in identifying farmers who are interested in supplying grain to the plant.

"We're trying to establish a core group of producers that deal with us... We're trying to make it as attractive as possible, especially in this first year or two. Hopefully, they'll want to continue year after year.''