In Willmar, company takes pulse of ethanol industry

  • Article by: DAVID SHAFFER , Star Tribune
  • Updated: August 25, 2012 - 4:55 PM

As ethanol producers struggle with high corn prices, Christianson & Associates has carved out a niche in the industry by collecting data on plant performance.

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John Christianson, left, is principal partner in Willmar, Minn.-based Christianson & Associates, an accounting and consulting firm that has created a fee-based service to track the efficiency and performance of ethanol plants. The service, called Biofuels Benchmarking, is managed by Paula Emberland, right. It offers ethanol plant clients a way to measure their efficiency, which has become critically important as operating margins are pinched by high corn prices. Credit: Sandy Holtberg, Christianson & Associates

Photo: , Christianson & Associates

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No company likes to be called a laggard.

Yet a consulting company in Willmar, Minn., has built a successful business telling some ethanol producers just that.

Christianson & Associates collects financial and production data about ethanol plants in the United States and Canada.

It analyzes and aggregates the information, stripping it of company-identifying details, to create the only source of performance data in the ethanol industry.

Producers pay up to $7,500 a year for the fee-based Biofuels Benchmarking service, giving them a detailed look each quarter at how they compare to anonymous peer groups.

Some companies find out they are leaders in the industry. But often, the most important revelation is that a plant is a laggard in one or more measures of performance.

"The intention is not to hurt anybody's feelings," said John Christianson, who founded Biofuels Benchmarking. "The intention is to draw attention that you are in the bottom 25 percent of the industry in the metric being measured. That is where you have an opportunity to improve."

Paula Emberland, who grew up on a Willmar-area dairy farm and holds a degree in finance, manages the benchmarking service, which has grown from eight clients at its beginning in 2003 to more than 60 today. Two other full-time employees and one part-timer work on the service.

The idea grew from Christianson & Associates' work as an accounting and consulting firm for agricultural clients and ethanol company start-ups more than a decade ago. Those services remain at the core of the firm's business, which employs 52 people.

Biofuels Benchmarking has made Christianson & Associates a leading voice in the ethanol industry, with its staff sought after as speakers at meetings and conferences, including one in Minneapolis in June.

Unlike other ethanol industry analysts who largely rely on estimates and models to assess whether plants are profitable, Christianson, Emberland and their team collect data each quarter directly from producers.

"We have the hard numbers," she said.

In its early days, the ethanol industry lacked a way to compare efficient and inefficient plants.

"There was a need for ethanol plants to understand what normal was," said Emberland, who joined the firm in 2006.

How it works

Ethanol plants that sign up for the service agree to enter their own financial and production data via a secure Web server at Christianson & Associates.

Then, each quarter, the plants receive reports on an array of performance measures. One key metric is known as a grind margin, which is essentially the difference between a plant's costs, mostly for corn, and the revenue from ethanol and various byproducts such as livestock feed.

Participation in the service is kept confidential, and no plant can see how a competitor is doing. But each participating plant can compare its performance to the industry average as well as selected peer groups summarized by Christianson & Associates.

"After the reports are released, our phones ring off the hook because something has changed in that particular quarter so they want to understand what is happening," Emberland said.

If plants seek more insight into their performance, the benchmarking staff will meet with management or board of directors.

One other key measure is a plant's ethanol yield. The industry average is 2.72 gallons per bushel of corn, Emberland said. One company, she said, discovered it was way below average, and made changes that boosted its bottom line by $2 million a year.

The service also allows clients to compare whether they're paying the going price for corn and getting a good price for ethanol and byproducts like corn syrup, corn oil and animal feed called distillers grains.

Last year, corn represented about 94 percent of a plant's costs, up from 80 percent, she said. As a result, ethanol companies increasingly use hedging strategies, such as futures contracts, to reduce their exposure to fluctuating prices.

One recent finding from the Biofuels Benchmarking data is that plants purchasing corn directly from farmers, rather than from elevators, tend to have higher ethanol yields. That's probably because farmers are hauling in higher-grade corn, with more starch, Emberland said.

Christianson said he hopes to expand by adding more clients in the ethanol industry. And the benchmarking technology platform, built on an in-house database, eventually could be adapted to offer the same service to other industries, including biodiesel producers, he said.

David Shaffer • 612-673-7090

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