What are the characteristics of Al-Corn’s current business model?
Al-Corn Clean Fuel is a farmer-owned ethanol production cooperative founded in 1994. Similar to other co-ops, Al-Corn’s 500 members invest in the company financially but also agree to deliver a quantity of corn determined by their investment in the business. The “corn commitment” has been a key contributor to Al-Corn’s success.
Why did Al-Corn’s founders create the cooperative model?
In the early 1990s, depressed corn prices drove local farmers to seek new opportunities to add value to their commodity. A steering committee of 50 farmers developed Al-Corn’s current business model based on the experience of other early ethanol plants in Minnesota. The founders’ key goals were to:
- Raise initial capital to build the foundation for future growth
- Provide a guaranteed market for ethanol production
- Return more value to members and benefit local communities
Did Al-Corn’s founders achieve their goals?
Yes. The co-op model raised the capital necessary to build a firm foundation for Al-Corn’s success and Al-Corn’s strong cash position has benefitted members throughout its history. The business has also created a guaranteed and more stable market, has added significant value to its production and has enhanced local communities.
How do Al-Corn members benefit from the current model?
- Beating Chicago Board of Trade corn prices
- Opportunities to add value to members’ investments
- Reduced concentration of risk
- Significant tax advantages
- Benefits local families and communities
Learn more about the cooperative benefits.
How has the co-op model helped Al-Corn weather the recession and other uncertainties during its 15-year history?
Despite the worst recession in 70 years, Al-Corn is financially and competitively strong thanks to its business model. Al-Corn’s financial strength allows it to add production capacity and value without making Al-Corn bigger. Instead, Al-Corn can strategically and cost-effectively invest in ethanol plants and partnerships in other regions. In addition, Al-Corn’s conservative approach has allowed the co-op to pay off its debt and build a cash reserve, pay corn prices as good as, or better than, competing markets and improve the operations of the Claremont plant.
In what ways has Al-Corn’s business approach allowed it to improve its operations?
- Creating new products to increase revenues (i.e. CO2 and corn oil capture).
- Record-setting environmental improvements such as reducing water consumption to less than 2.5 gallons of water per gallon of ethanol and eliminating liquid discharge. Energy conservation investments have reduced the plant’s energy use by more than 25% compared to Al-Corn’s original plant design.
- A strong market share through property and other investments.
- A conservative approach and strong cash position that have allowed Al-Corn to eliminate its debt, build a cash reserve and make investments that return more value to members and their communities.
How does the current business model position Al-Corn for the future?
The current model positions Al-Corn for a successful future. Just as it has throughout Al-Corn’s history, the model will continue to maximize member investments, spread the risk and maintain a strong cash position to weather market fluctuations. In addition, Al-Corn is in a position to add capacity at a much lower cost as demand changes, returning even more value.
Al-Corn has done business under the current co-op business model for more than 15 years. Isn’t it time for a change?
No. Stepping back from the approach that has built Al-Corn’s strong foundation and continues to benefit members would be a mistake. Instead, Al-Corn will focus on the next phase of success that our co-op model allows — better than average prices, higher value for members and our region and the ability to compete in the changing marketplace.