Kathy Frahm, vice president of commercial lending-renewable fuels
| Nov 25, 2014
A recent news article in Ethanol Producer Magazine highlighted the continued support of four primary lenders to the ethanol industry, all of whom are part of the Farm Credit System. FCSAmerica is proud to be one of these committed and dependable lenders.
FCSAmerica began financing the renewable fuels industry more than a decade ago as an extension of our mission to finance rural America. Numerous ethanol projects in operation today were organized/ established by farmers and livestock producers as a way to strengthen local corn demand and revitalize rural communities through improved agricultural profitability, higher land values and new employment opportunities.
Today, our renewable fuels team finances approximately 50 ethanol production facilities throughout the Midwest, serving in the roles of lead lender and participant. The ethanol industry has weathered multiple storms. The rapid ramp-up in construction/production was stunted by the economic crisis of 2008-2009. The drought of 2012 caused the price of corn to escalate, straining margins for the entire industry and causing several plants to shutter and most producers to scale back operations. For the past few years, as the retail fuel sector has approached the 10-percent “blend wall,” oil companies have become increasingly concerned about ethanol’s market share. Negative advertising and political pressure have intensified to challenge the Renewable Fuels Standard (RFS) and limit competition in the marketplace from higher blends of corn-based and advanced biofuels.
When the year ends, 2014 will be regarded as one of the most profitable for ethanol producers. With that profitability, producers have strengthened their balance sheets by reducing term debt and building working capital. This kind of financial positioning will afford ethanol producers the resilience to withstand the inevitable downturns inherent in agriculture and its related industries. Additionally, these companies are well positioned to take advantage of expansion/growth opportunities as they evolve in the marketplace.
As a mission-based cooperative dedicated solely to agriculture, we’re committed to the ethanol industry, as well as the farmers and livestock producers who were essential in its grassroots development.