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Industry bracing for fallout from plant closure
By JONATHAN CRIBBS
HOPEWELL, Va. (Sept. 22, 2015) — It’s too soon to tell what effect the closure of Vireol Bio Energy’s ethanol plant will have on eastern Virginia’s grain market, industry officials said last week, but it won’t be positive.
The plant paid farmers well for their grain, and the closure comes at an inopportune time for the state.
“With the closing of one of Virginia’s largest corn destination markets coinciding with what looks to be the largest corn crop the state has harvested, it’s caused short-term storage and logistical issues,” said Robert Harper, the Virginia Farm Bureau’s grain manager. “We’re going to have to wait and see how all this shakes out.”
The plant announced its shutdown late last month, blaming the plunging price of oil, which drove down the price of ethanol more than a third over the last year. Since it opened in April 2014, Vireol, a British company, produced more than 170,000 gallons of ethanol a day at Hopewell and was set up to produce more than 60 million a year, most of it fueled by Indiana grains. It was the largest plant on the East Coast, a unique location. Most ethanol plants are centered in the Midwest around the country’s major grain corridor.
But for local corn and barley farmers, the plant paid a strong basis, which forced other local buyers, such as poultry integrators, to keep theirs competitive as well, Harper said. Farmers also didn’t need to travel as far to sell to Vireol.
“Farmers were coming out ahead on basis, but a lot were coming out ahead on freight because they had less miles to haul their corn,” he said.
Bryan Taliaferro said he produces between 300,000 and 350,000 bushels on nearly 4,000 acres in Essex County. He said his farming operation earmarked roughly 50,000 bushels for Vireol this year. A good number of farmers in his region were also selling to the plant, he said.
But Virginia is a grain deficit state, and any corn or barley that went to Vireol — through its partner, The Scoular Co. of Omaha, Neb. — will quickly find a new buyer, perhaps at a cheaper price, Taliaferro said.
“The Vireol plant just made the grain deficit higher,” he said. “I’m not about to tell you that the sky is falling. I’m sad. I like to see a good business thrive. It’s good for everybody. But it’s not the end of the world.”
Vireol has reportedly said its closure is temporary and plans to reopen in an improved market. Company officials could not be reached for comment. Vireol purchased the plant — formerly known as the Osage Bio Energy ethanol plant — in January 2013 for about $13 million. Its previous owners were focused on processing barley, a choice that failed. The company initially planned to move the plant to England but decided to keep it in Virginia and focus on corn after a Harvard University study showed its viability.
Most of the plant’s ethanol is shipped to Richmond-area mixers in the production of gasoline. The Richmond area alone consumes about 110 million gallons of ethanol per year, and the state consumes about 410 million gallons.
But Andrew Smith, a lobbyist with the Virginia Farm Bureau, said he laments the fact that Vireol’s departure, if it doesn’t reopen, weakens a region that’s lost grain markets to consolidation over the last several years.
“It would be a tremendous loss,” he said.