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Brian Cofell, General Manager,

Email: brianc@cspcoop.com

Tel: 519.312.0267

Co-op recruiting member/investors to create biomass value chain

November 22, 2016

 

 

An Ontario-based farmer’s co-operative is recruiting members who are interested in supplying corn stover and wheat straw to a proposed new cellulosic sugar plant to be built in Sarnia’s Chemical Valley.

 

The co-operative’s proposal also provides farmers an opportunity to become equity investors in the venture and share in any future profits gleaned from the sale of cellulosic sugar and its many by-products.

 

The Cellulosic Sugar Producers Co-operative (CSPC) was incorporated in the fall of 2014 by a small group of local cash-croppers who had a vision of enabling farmers in Ontario to participate in – and profit from – the developing market for agricultural biomass, particularly in the nascent cellulosic sugar industry.

 

Following the completion of aggregation studies and preliminary economic assessments conducted by the University of Guelph, Ridgetown Campus and the Ontario Federation of Agriculture, researchers recommended an agricultural co-operative as the best business model for this type of venture. Consequently, the CSPC was founded.

 

At present, there is no cash market for corn stover in Ontario and if successful, the venture would result in a totally new stream of revenue for participating farmers.

 

Over the past four years, under the leadership of the CSPC and its industry partners, two projects were undertaken by Bioindustrial Innovation Canada (BIC) to assess the technologies available and confirm the overall viability of the venture.

 

BIC concluded that there was sufficient economic value with available technologies to support the construction of a commercial plant to produce cellulosic sugar in Southwestern Ontario.

 

It recommended the CSPC partner with Comet Biorefining Inc. in the venture and the two entities have since agreed to initiate a business plan and embark on a capital campaign to get the project off the ground. Comet Biorefining has developed a novel process to convert non-food cellulosic biomass into high quality, cost-competitive cellulosic glucose (sugar).

 

The company operates a demonstration scale plant in Italy, but the proposed facility in Sarnia will be its first commercial operation.

 

The company recently received a $10.9 million grant from Sustainable Development Technology Canada toward the construction of the proposed, one-of-a-kind, bio-based, chemical plant.  

 

The co-operative hosted field-trial demonstrations Nov. 8 on the farm of Brad Goodhill near Forest and again on Nov. 9 at Chuck Baresich farm Bothwell.

 

The events were held to demonstrate the process and equipment used to remove corn stover from the fields and provide information for potential new co-op members.

 

CSPC president Dave Park, who farms near Sarnia, says he sees the venture as a value-added opportunity that will increase revenues for farmers.

 

“Corn isn’t performing well on the market right now and $4.30 corn is no fun for any of us,” he said. “So if we can add value to that crop without putting more costly inputs into the ground or buying more land, I’m all for a value-added opportunity.” Park said the prospect of adding value to an existing crop was what got him interested in the project and believes that will appeal to a lot of growers in the community.

 

While some have questioned the agronomic wisdom of removing organic material from the land, Park said with improved corn genetics and the advent of no-till practices, there are certain advantages of removing at least, some of the residue from the field.

 

He noted that improved genetics has allowed farmers to go narrower rows and increase seed populations, which has improved corn yields dramatically. However, he said with higher yields comes larger stalks and more biomass left in the field.

 

He said managing that residue has become problematic for growers who want to no-till soybeans following corn because the heavy residue restricts the growing plants from coming through and establishing a good early stand of soybeans.

 

“On our farm we’ve had to return to some primary tillage, so removing some of the that biomass is a good thing,” he said. “It allows us to no-till soybeans right into the stubble the following spring and get a good stand.” Park said he sees the co-operative’s venture as a value-added opportunity for farmers and a way for them to vertically integrate their operations into the market place.

 

Proposed plant will be 30 per cent owned by co-operative members Jim Campbell, general manager of AGRIS and secretary of the CSPC, said ultimately the cooperative will be 100 per cent farmer owned.

 

“The farmers who own this co-op will also be the suppliers of the biomass and will also be shareholders in the plant,” he said, adding that this type of structure is known as a closed co-operative. 3 “You must be an investor to sell biomass to this plant.”

 

He said this idea arose when the founding co-operative members decided they didn’t just want to be commodity suppliers to another processing plant.

 

“We think the farmers should own it,” he said, adding that the proposition is that when construction of the plant is completed, co-operative members will hold a 30 per cent equity position in the operation.

 

Campbell said the overall cost of the plant would be $70 million, of which the co-operative would be required to raise $11 million. He said that would include the cost of harvesting equipment and a storage yard for the stover. He added that there is about $10 million of federal government money available in the form of an interest-free loan and the rest of the capital would have to be raised by Comet and the CSPC. He said the company is working with two well-known local lenders to arrange the commercial debt required.

 

Campbell said once the plant is operational, it will require about 55,000 acres of corn stover and wheat straw annually to feed the plant. He said the co-operative is asking interested farmers to sign a supply agreement which states they will supply the stover or wheat straw from a set number of acres. He said they would like that to be a minimum of 100 acres and would prefer it to be 1/3 wheat straw and 2/3 corn stover.

 

“In turn, we are asking them to buy a $500 membership share and make an investment of $200 for each acre you sign up,” he said, adding for example, if a farmer signed up to supply the biomass from 200 acres he or she would be required to make an investment of $40,000 in the plant through the co-operative.

 

“It’s a typical co-op structure of one member/one vote and the rest will be Class-one preference shares,” he said. He said there is a 92-page offering statement available to anyone interested that provides the terms of the agreement in detail.

 

Campbell said their projections indicated that a farmer will be paid about $42 an acre for corn stover and the returns on the investment in the plant should provide another $20 per acre.

 

“So for a $200 investment we project you will get a $63 per acre (annual) return,” he said.

 

He added that the money invested would be held in escrow until construction of the plant begins. “Not one dollar of farmers’ money will be at risk until the plant is shovel ready,” he added.

 

4 Proposed plant will produce 27,000 metric tons of high-purity dextrose Comet Biorefining founder and CEO Andrew Richard noted that the productivity of the land and the number of acres in the region, along with Sarnia’s industrial infrastructure, make the area an ideal place to construct the plant.

 

“The co-operative will be our most important partner as we develop this industry,” he said. “We don’t want to just buy stover from a group of farmers, we want to partner with them along the value chain.”

 

He said using the technology Comet has developed, the plant will produce a very high purity dextrose, which is in strong demand within the chemical and biofuels markets.

 

“One of the things that differentiates this technology is that we can produce a material that goes into high-value markets such as chemicals, plastics and bioproducts,” he said. “Things that we use every day.”

 

He added there is significant “pull” from the market and consumers to have products made from feedstocks that are renewable and are not petroleum based.

 

“This interest is significant and one of the very important things is the cost, quality and consistency of this material,” he said.

 

Richard said the North American market for high purity dextrose is between three to four million metric tons annually, adding the proposed plant will produce about 27,000 metric tons annually and “won’t put a dent in that market.”

 

Also speaking was Jay Cunningham, who was recently hired as the co-operative’s business development manager. He noted that it will be his job to source the 55,000 acres of biomass required as well as the investment that goes along with it.

 

“I have had an opportunity to meet all the players and I can tell you this a well thought out and well planned venture,” said Cunningham, who is well known in the Lambton/Chatham-Kent area, having spent many years in agricultural banking. “I am excited to be involved in this project and excited about talking to anyone who is interested. Let’s move this thing forward and have a very successful launch of this new co-op.”

 

He noted that once farmers have finished combining their corn, they are through with it in terms of harvesting the corn stover.

 

The co-operative comes in chops and windrows the stover, bales it and stacks the bales on the headlands where it is picked up and trucked to the plant or aggregation yard. 5 “It’s a busy time of year and the farmer is free to continue on with his other work,” he said.

 

Examples of the equipment required, which include a 20 ft. Hiniker Flail Chopper, AGCO 2270 HD 3 by 4 by 8 ft. large square baler, and a ProAg bale stacker were demonstrated at both field trial events. Early estimates suggest the proposed plant, which is expected to be operational by 2018, could create 100 permanent jobs and add $100 million to the provincial economy.

 

 

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