Ethanol, and the unit train vs carload conundrum

[Anonymous]

There's a good article in Railway Age from the President of Iowa Interstate Railroad regarding future prospects for ethanol transporation. He makes a valid point that new ethanol plants will have to be large scale to accomodate unit train operations because smaller carload facilities cannot expedite the cycle of tankers to and from the plant:

http://www.railwayage.com/B/xpov.html

The question is - if even ethanol is subjected to a railroad desire for unit train only size and track layout requirements, doesn't that instantly kill off most start up ethanol plant proposals in the first place? How many areas of the country have enough corn growing acreage available to feed the required size of plant?

What's going to happen is that in order to effectively run such a plant, they will have to end up trucking in feedstock from hundreds of miles away just to have enough input product to produce the output at optimal economies of scale. Then the end product will only be able to be shipped to a large scale fuel mixing facility, so forget local and regional blending. This will result in higher costs, which will be passed on to the consumer.

Is it possible the unit train concept can actually cause an increase in consumer prices rather than a decrease (ostensibly passed on to the consumer via unit train economics)?

[Murphy Siding]

You vastly underestimate how much corn is grown in South Dakota, Nebraska, Minnesota, Iowa,Missouri, Illinois, Indianna...........

[tree68]

Considering that most of the ethanol production will be concentrated where it can be most economically made, and the blending will likely be done where the petroleum part of the mix is already being handled, unit trains should fit most of the operating scenarios.

That's not to say that there might not be some carload handling from smaller facilities, but even that can be gathered into unit blocks at some point, much as coal is now.

[Anonymous]

The ethanol plant near us isn't even served by rail. All the production is trucked.

[Anonymous]

Here's the conundrum:

Assuming all product in and out is brought by unit train, you are going to have at least 4 unit trains of inputs for every 1 unit train of output. And those 4 unit trains of inputs (aka corn) will be a relative shorthaul for the railroads, compared to the long hauls to export facilities. Since it is unlikely that acreages of corn plantings will increase much due to ethanol plants sprouting up, that corn will simply be diverted from long haul unit trains headed for ports, to short haul unit trains running from shuttle elevator to ethanol plant.

Isn't one unit train cycling a thousand miles more profitable than four unit trains cycling 100 miles at a shot?

[Murphy Siding]

Dave-you must not have too many ethanol plants where you live. All the ones around here have a big parking lot for the overflow of trucks bringing corn in. Typically, if you stood on the highest building of the facility and looked in every direction, all you would see is corn fields. You would also probably see the grain elevators in every small town-spaced about 6-10 miles apart. You would also find it near impossible to count the number of grain bins on farms within a few miles of nearly any ethanol plant.

[Anonymous]

I'm not sure what you mean by large scale mixing facility, but gasoline generally gets to the local and regional distribution facilities by pipeline and ethanol is added there. AFAIK, ethanol whether it's E10, E85, or E100 can't travel by pipeline. The various blends required by EPA also vary by region.

Many parts of the Midwest have had E10 for quite a while so the farm, plant, and distribution networks are already established. I suspect the bigger problem is how to serve the west coast and other areas of the country that don't grow corn in abundance. Part of the answer may be in using something that can be grown regionally, but in the mean time there needs to be a fairly large scale distribution network for those parts of the country.

Small ethanol plants are popping up like wildflowers as venture capitalists see a great investment opportunity, but in terms of volume, ADM is by far the dominant player and also has the resources and political clout to build large scale plants and a distribution network.

Ethanol may run into some of the same problems as MBTE. Wisconsin has already or is the process of outlawing E10 outside of the Milwaukee air quality region due to concerns about what it will do to the states many fresh water lakes. It was also causing major problems in boats with molded-in fiberglass gas tanks and that may become an issue in other states with large numbers of registered boats.

[CSSHEGEWISCH]

Considering the amount of subsidies involved in the production of ethanol as an automotive fuel, I'm not sure that the consumer isn't already being stiffed. E85 may be a fraction cheaper than the current gasoline-ethanol blends due to the subsidies, but it gives you less mpg so you wind up using more gallons of it for a given distance than gasoline.

[Murphy Siding]

QUOTE: Originally posted by CSSHEGEWISCH
[br]Considering the amount of subsidies involved in the production of ethanol as an automotive fuel, I'm not sure that the consumer isn't already being stiffed. E85 may be a fraction cheaper than the current gasoline-ethanol blends due to the subsidies, but it gives you less mpg so you wind up using more gallons of it for a given distance than gasoline.

My sentiments exactly.

[Anonymous]

This particular thread isn't focussed on the plusses and minusses of ethanol, rather that there is a push by railroads to force any potential ethanol plant to be large scale so that unit train operations can be employed.

Quothe up829:

QUOTE: Small ethanol plants are popping up like wildflowers as venture capitalists see a great investment opportunity...

This is a great example of why such proposals might end up getting squelched by the railroads due to the forced "big or nothing" approach.

If all future ethanol plants are forced to be large or nothing, then those local co-ops won't have a chance to succeed unless their end market is also local. If the railroads would willingly provide carload service, it could be a different story..........

[Murphy Siding]

QUOTE: Originally posted by futuremodal

This particular thread isn't focussed on the plusses and minusses of ethanol, rather that there is a push by railroads to force any potential ethanol plant to be large scale so that unit train operations can be employed.

Quothe up829:

QUOTE: Small ethanol plants are popping up like wildflowers as venture capitalists see a great investment opportunity...

This is a great example of why such proposals might end up getting squelched by the railroads due to the forced "big or nothing" approach.

If all future ethanol plants are forced to be large or nothing, then those local co-ops won't have a chance to succeed unless their end market is also local. If the railroads would willingly provide carload service, it could be a different story..........

Or it's all done with trucks. See post by tomtrain above.

[CSSHEGEWISCH]

Railroads are going to favor unit train operations because they are less expensive to operate and more profitable, even with a rate than a corresponding amount of individual carloads.
Three or four tank cars a day to be gathered up by the daily local freight may be tolerable if the plant is located on a main line since additional incremental costs are small and the freight is already running, but if the plant is located on a branch that only sees bi-weekly or tri-weekly service, a request for daily service is going to run up a lot of additional costs just for operation of additional trains, not to mention the costs of upgrading the branchline's track.

A railroad can no longer be all things to all shippers, those days passed when the truck was invented.

[Murphy Siding]

Thirty-five miles north of me,at Wentworth, S.D. is an ethanol plant built about 5 years ago. It is near the end of a little used brach line to the grain elevators at Madison, S.D. It was built there, knowing full well, that there would never be any unit train loads in or out. And yet, they still chose that location. What do you suppose they know that we (and Dave) don't. Oh.....it's also in the center of about 10,000 square miles of cornfields, and 10 miles from Interstate 29,and 30 miles from Interstate 90.[;)]

[jeaton]

Trucks? Even pipes? How foolish! Everybody should know by now that the laws of nature as prescribed by FM dictate that the grain in and the mash and ethanol out MUST move in railcars!!!

[RRKen]

QUOTE: Originally posted by futuremodal

This particular thread isn't focussed on the plusses and minusses of ethanol, rather that there is a push by railroads to force any potential ethanol plant to be large scale so that unit train operations can be employed.

Quothe up829:

QUOTE: Small ethanol plants are popping up like wildflowers as venture capitalists see a great investment opportunity...

This is a great example of why such proposals might end up getting squelched by the railroads due to the forced "big or nothing" approach.

If all future ethanol plants are forced to be large or nothing, then those local co-ops won't have a chance to succeed unless their end market is also local. If the railroads would willingly provide carload service, it could be a different story..........

Let me define small v. large first. Small is any capacity under 40 mmg/y. Large is over 100 mmg/y. Regardless of size, both will have a market. Not all product is being moved in unit trains, account too many destinations, and lack of capacity.

Second to the idea that all or nothing in ethanol is the fact the railroad does not call the market, the buyer does. The buyer, based on demand, tells the marketer how much, where and when. The marketer lines up his cars from his pool, and delivers when required. All the railroad does is take the waybill, and deliver as instructed.

There are about ten major marketers, all who "own" their own fleet of tanks. Mix them up with another marketers fleet? NEVER! Ain't gonna happen in this lifetime. The ethanol plant will contract with the marketer to move his production. The plant has nothing to do with the waybill, or how much. All he does is fill the marketers tanks.

More on this in other posts.

[youngengineer]

umm just because a buyer wants a railroad to move product doesnt mean a railroad will, take grain elevators bnsf will not load less than 110 cars except for a few places in the north. Grain elevators reguraly call and ask for smaller trains and railroad says no, or gives them a bill that is too large to justify.

[chicagorails]

rochelle ill. is building a huge one next to bnsf, fulton ill. (by clinton ia.) is building one next to up rr, and miss. river. they are poppin up everywhere.
hope we always get plenty of rain so we have corn for fuel.
if everyone was vegetarins would have to grow only 1/3 of what now. cows pigs chickens eat most of it. become a veggie and save fuel!!!

[RRKen]

QUOTE: Originally posted by futuremodal

Here's the conundrum:

Assuming all product in and out is brought by unit train, you are going to have at least 4 unit trains of inputs for every 1 unit train of output. And those 4 unit trains of inputs (aka corn) will be a relative shorthaul for the railroads, compared to the long hauls to export facilities. Since it is unlikely that acreages of corn plantings will increase much due to ethanol plants sprouting up, that corn will simply be diverted from long haul unit trains headed for ports, to short haul unit trains running from shuttle elevator to ethanol plant.

Isn't one unit train cycling a thousand miles more profitable than four unit trains cycling 100 miles at a shot?

Ooops, mixed up my posts, oh well. Let's start with supply. Only plants being built in Texas, Arizona, and California will have issues with corn supply. Mid-West plants get supply from the local producers or county elevator. It is ALL trucked in (or John Deere).

Plant profitability depends on corn cost and fuel. You increase either or, and you have issues. To add transport to corn, no matter where, will require some other balance to keep the place open for very long.

It may not seem like it now, but when fuel prices do stabilized, it will be quite difficult for a plant to make a profit with the expense of transporting corn from far away. Current market prices, especially spot prices, will allow that. But don't expect that to last very long.

Shuttle trains can be 200 miles and be profitable. UP ran small unit bean trains for Cargill in Iowa Falls from Fairmont, MN in 2002 and 2003. Depends on the customer, contract and so forth. The shipper is the one who deems whether a move is profitable or not. Given local diesel prices, a short haul for the customer will save him money, no matter unit or otherwise.

In respect to my previous post, I have a map of current (last month) delivery points for ethanol from UP in Iowa. http://users.dwx.com/~kcschmidt/Maps/Ethanol_Terminals.jpg This is a simplification as more have popped up in the east and south, so it needs an update. I choose UP in Mason City, Iowa since they have the lion's share of Iowa and Minnesota production. Currently, UP ships unit trains of 71 cars to Albany, NJ and Sewaren, NY.

This map shows Iowa plants on UP and capacity. http://users.dwx.com/~kcschmidt/Maps/UP_iowa.pdf At last look, the producers in this area as a total, only consume about 20% of corn production (2005). Again, this map needs to be updated as a few more plants have been verified to be built. All plants except Albert City are in production (AC is not that far off from crushing corn at this time).

More after work, gotta run and switch the ethanol.

[rrandb]

This is just the enviroment branch line operaters thrive in. They provide daily service 7 days a week if need be. It is their bread and butter. While the class one's could care less any additional carloads make a huge difference to their bottom line. There will be plenty of peole who are willing to step up and fill in the gaps. It what they do for a living. [2c] As always ENJOY

[Anonymous]

Here is a suggestion to the Corn Industry:

Stop producing Corn Syrup and High Fructose Corn Syrup

Start producing 100% Ethanol

It is better for all of us to have as much Ethanol available as possible.

We can stop drinking soda and start driving autos fueled by Ethanol.

With an abundance of Ethanol, we can finally have unit trains all the time.

Andrew F.

[Anonymous]

I've also heard there's a pu***o import ethanol by sea to coastal regions.

[Anonymous]

QUOTE: Originally posted by Murphy Siding

Thirty-five miles north of me,at Wentworth, S.D. is an ethanol plant built about 5 years ago. It is near the end of a little used brach line to the grain elevators at Madison, S.D. It was built there, knowing full well, that there would never be any unit train loads in or out. And yet, they still chose that location. What do you suppose they know that we (and Dave) don't. Oh.....it's also in the center of about 10,000 square miles of cornfields, and 10 miles from Interstate 29,and 30 miles from Interstate 90.[;)]

Did you even read the article? The gist of the article is that future growth in ethanol production facilities must conform to unit train dynamics, both for inbound corn and outbound products. Thus, the "all unit train or nothing" spector.

I am responding to the thesis put forth by the writer. What are you responding to?

[Anonymous]

QUOTE: Originally posted by jeaton

Trucks? Even pipes? How foolish! Everybody should know by now that the laws of nature as prescribed by FM dictate that the grain in and the mash and ethanol out MUST move in railcars!!!

Read the article before you pop off unnecessarily. Read my last reply to Murphy. Then respond.

[beaulieu]

QUOTE: Originally posted by up829


Small ethanol plants are popping up like wildflowers as venture capitalists see a great investment opportunity, but in terms of volume, ADM is by far the dominant player and also has the resources and political clout to build large scale plants and a distribution network.

As well as the other large agribusiness companies like Cargill, Lyle & Tate, etc.
There are a lot of smaller Ethanol producers but they are finding it better to market their product through ADM or Cargill as the lack marketing leverage with the major Oil Companies like ExxonMobil.

QUOTE:
Ethanol may run into some of the same problems as MBTE. Wisconsin has already or is the process of outlawing E10 outside of the Milwaukee air quality region due to concerns about what it will do to the states many fresh water lakes. It was also causing major problems in boats with molded-in fiberglass gas tanks and that may become an issue in other states with large numbers of registered boats.

Still selling E10 here in the NW part of Wisconsin as of a few hours ago,


John Beaulieu

[edblysard]

And exactly who forced these people to build the "small" plants?

I would surmise they see a profit in doing so, regardless of who, or how their inbound and outbound products move.

Oh, and Dave, the days of one and two car load railroading by the class 1 roads is gone...been gone for quite a while.

Just like your Montana wheat whining, it will not come back.

Now, a regional or short line might take a chance on it, but none of the Class 1s want, or need single car load business.

Or is this just another one of your threads designed to allow you to bring up your imagined moral obligation of railroads to help the "little guy"...and expound on your theory of railroads being conspirators in a nation wide scheme to control everything and screw over the little folks like yourself?
(of course it is!)

And I love the fact that you are quoting Trains magazine….in one of your other rabid postings, you dismissed the value of Trains magazine when it was quoted by someone who didn’t agree with you…If I remember correctly, you said something along the lines that Trains magazine was a railfan magazine, and that you took nothing published in it seriously, that they (Trains) were nothing but a instrument of and pandered to the railroads, and that the people who wrote for it were simply mouthpieces for the rail industry.

And now, you use the same magazine to back up your nonsense, and manage to alter the writers words just enough in your “almost his exact words” quote to...well, most of us are used to you selectively editing quotes to fit your needs.

Guess switching horses in mid stream is normal for you, huh….isn’t this sort of like sleeping with the enemy?

Besides the Milwaukee, is there any thing a railroad does, or any railroad for that matter, that you like?

Ed

[Murphy Siding]

Well Dave, I see BNSF has a train in a siding lined up to run up to Wentworth. It's the typical size, 12-15 empty tanks, and 12-15 loaded corn hoppers. They run up there once or twice a week.
It appears from the article, that the new ethanol plants built where there is no corn (duh!), probably require unit trains just to compete with the plants that were wisely built in corn country. It would be kind of like building a refinery in S.D.

[Anonymous]

QUOTE: Originally posted by edblysard

And exactly who forced these people to build the "small" plants?

I would surmise they see a profit in doing so, regardless of who, or how their inbound and outbound products move.

Oh, and Dave, the days of one and two car load railroading by the class 1 roads is gone...been gone for quite a while.

Just like your Montana wheat whining, it will not come back.

Now, a regional or short line might take a chance on it, but none of the Class 1s want, or need single car load business.

Or is this just another one of your threads designed to allow you to bring up your imagined moral obligation of railroads to help the "little guy"...and expound on your theory of railroads being conspirators in a nation wide scheme to control everything and screw over the little folks like yourself?
(of course it is!)

And I love the fact that you are quoting Trains magazine….in one of your other rabid postings, you dismissed the value of Trains magazine when it was quoted by someone who didn’t agree with you…If I remember correctly, you said something along the lines that Trains magazine was a railfan magazine, and that you took nothing published in it seriously, that they (Trains) were nothing but a instrument of and pandered to the railroads, and that the people who wrote for it were simply mouthpieces for the rail industry.

And now, you use the same magazine to back up your nonsense, and manage to alter the writers words just enough in your “almost his exact words” quote to...well, most of us are used to you selectively editing quotes to fit your needs.

Guess switching horses in mid stream is normal for you, huh….isn’t this sort of like sleeping with the enemy?

Besides the Milwaukee, is there any thing a railroad does, or any railroad for that matter, that you like?

Well, if you want you can look back through your TRAINS mags to find the exact quote, then you might have a shred of justification to criticize me for referencing an item in TRAINS to provide evidence that BN and UP willingly turned down short haul grain business in Eastern Washington. Your problem is you can't discern between an op-ed piece and a writer's observations. The fact of the matter is, sometimes the items in TRAINS are on the point, other times they are way off base. Just like most other mags and papers out there, each has a variety of writers with a variety of opinions and observations. If I agree with what a TRAINS writer has said, I'll say so. If I don't, I'll also opine my critique. That's what independent thinkers do, as opposed to a bunch of yes men like you.

However, if you agree with everything that's ever been written in TRAINS..........(insert brownnose smilie here)

The point of the Railway Age article is that requirements for unit train compatible operations for ethanol plant proposals will limit the number of such plants that can be built. It is all part of a larger terminal consolidation program by Class I's that have resulted in more traffic having to switch to trucks to get their goods to market. I have pointed out time and again that the beneficiaries of unit trains/terminal consolidation are limited to railroad operating dynamics, and not to shippers nor necessarily the railroad's bottom line. Rail shippers who used to have carload and small lot car service now have to truck their product to the unit train facility at significant distances away, so this shift away from carload to unit train has caused an increase in their overall transportation costs. Consolidation has also caused the railroads to dimini***heir customer base as some shift to trucks and highways for the entire haul, bypassing the railroad megaterminals, while others simply shut down and either spend their investment money on dotcoms or on Chinese factories that make what used to be made in the USA.

The long haul over the road trucking sector is purely an inadvertent invention of the railroad industry.

[RRKen]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by Murphy Siding

Thirty-five miles north of me,at Wentworth, S.D. is an ethanol plant built about 5 years ago. It is near the end of a little used brach line to the grain elevators at Madison, S.D. It was built there, knowing full well, that there would never be any unit train loads in or out. And yet, they still chose that location. What do you suppose they know that we (and Dave) don't. Oh.....it's also in the center of about 10,000 square miles of cornfields, and 10 miles from Interstate 29,and 30 miles from Interstate 90.[;)]

Did you even read the article? The gist of the article is that future growth in ethanol production facilities must conform to unit train dynamics, both for inbound corn and outbound products. Thus, the "all unit train or nothing" spector.

The reality is right now, it is not that way. When I look at a list of cars billed out, I see lots and lots of singles. Out of 215 last night, none were units, none.

It is some customers and marketers who want the units. Right now, there are only three terminals in the U.S. that can handle them; Watson, CA; Sewaren, NJ, and Albany, NY. (yes I know the aricle says four, if you count Pipola, AZ, which ADM has to itself last I looked) Otherwise, you are just parceling up trains at one end then parcelling them out at the destination.

There are a few locations that can take unit trains of DDGs. Pixley, Ca comes to mind as one of them. Otherwise all those cars are singles as well.

Although more large terminals will be in the future, you cannot have them in some small location in Michigan or Ohio where they may use only five tank cars a month. So there will always be singles running. I am thinking of places like Richmond, VA, or Spartensburg, SC in particular.


I will also dispute the gentleman from Iowa Interstate about inbound corn shipments by rail. Since the first plant here opened in 1998 until now, I have yet to see one inbound train of corn to their facilities. In fact, this area used to send ADM in Clinton, IA trains about once or twice a week. ADM had five or six commited trainsets of cars and power to fulfill the commitiment. This year, only one elevator has shipped to ADM from this area. And the reason is the competition from local ethanol plants. Why get a lower price for your grain at ADM because of transport, when you can get a better price in your county? And that is exactly what the producers here feel. ADM and Cargill in Eddyville for that matter, must seek out other markets, and in the past three or four years have. The only folks this does not really effect is the cattlemen, who now use DDGs as a feed instead of whole grain.

An example is the feed lot in Maracopia, AZ. They get multiple unit trains of corn for feed. But now they are building their own ethanol plant. While they will see better prices on local DDGs, they will not see much savings on whole grain as they still must trainsport it from places like Iowa or Nebraska, who has a surplus. Same goes with the California feedlots. I think the term becomes non-competitive.

Lastly single car cycle times. I will not dispute that a unit train gives excellant car cycle. All the trains we have sent to Albany have turned in ten days from shipper siding to shipper siding. But Albany can unload 100 cars in 24 hours. Not all end terminals can do that kind of capacity. Surely the ethanol plants cannot load that fast, so they must accumulate cars about a week or more before they can ship a unit. One way around it the marketers have been using is to line up two plants to fill out a unit. Works out rather well since the second plant is right on the way to the destination.

In the last few years, I have watched as single cars get about 12 to 15 day cycles to the West Coast and back. Now that the West Coast is not a market we serve, the times get shorter. However, it has always depended on the terminal to unload them. And they tend to be the biggest part of delays of cars. Marketers ship cars based on unloading schedules. But they do not control the end terminal, just sell to them. If Ozul, CA for example gets backed up, those cars they cannot handle have to sit somewhere. And that somewhere is a railroad yard or siding. Meantime, there is more on the way already.

Don't get me wrong, the ethanol industry is changing and will continue to. Average plant size in 2002 was 40 mmg/y, now the norm is 100 mmg/y. Production process has also changed. Marketers will meld both rail with barge and truck to deliver the product to the racks. But you will not eliminate the single car shipments, and ethanol plants will not be competitive if they need to ship in whole grains by rail, no matter the economy of scale.

[RRKen]

QUOTE: Originally posted by beaulieu

QUOTE: Originally posted by up829


Small ethanol plants are popping up like wildflowers as venture capitalists see a great investment opportunity, but in terms of volume, ADM is by far the dominant player and also has the resources and political clout to build large scale plants and a distribution network.

As well as the other large agribusiness companies like Cargill, Lyle & Tate, etc.
There are a lot of smaller Ethanol producers but they are finding it better to market their product through ADM or Cargill as the lack marketing leverage with the major Oil Companies like ExxonMobil.

QUOTE:
Ethanol may run into some of the same problems as MBTE. Wisconsin has already or is the process of outlawing E10 outside of the Milwaukee air quality region due to concerns about what it will do to the states many fresh water lakes. It was also causing major problems in boats with molded-in fiberglass gas tanks and that may become an issue in other states with large numbers of registered boats.

Still selling E10 here in the NW part of Wisconsin as of a few hours ago,


John Beaulieu

ADM controls ADM, not the market total. Besides, ADM maybe makes up at this time less than a quarter of the production capacity. Second in capacity is VeraSun followed by Aventine and Hawkeye Renewables.

Too many players. Other marketers are, Aventine, MUREX, Growmark, Ethanol Products, Eco-Energy, Renewable Products Marketing Group, United Bio-Energy, CHS, and a few smaller firms. VeraSun will be marketing their own product after this year.

[RRKen]

QUOTE: Originally posted by edblysard

And exactly who forced these people to build the "small" plants?

I would surmise they see a profit in doing so, regardless of who, or how their inbound and outbound products move.


Ed

In 2001 to 2004, their plants were the norm capacity for dry mill facilities. Now a days, 100 mmg/y plants are the norm. Most of these smaller plants were built and owned by Co-ops. Looking at figures from a University of Minnesota paper, they are profitable based on 2003 ethanol price contracts. Today, wow. (BTW that paper also showed that even without subsidy, they can profit if they control expenses.)