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Running the Numbers

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By Glenn Farris

In my last post, I discussed the business plan for Pellet Technology USA (PTUSA) and their strategy for utilization of over 100,000 tons of densely packed corn stover. What makes this undertaking especially interesting is that they will utilize that significant amount of corn stover year after year to create their sustainable business. They aren’t planning to be a one-hit wonder. And that kind of volume isn’t something you can just order online from Amazon.

As we worked with the PTUSA team on providing the overall solution to collect, bale, pick-up, transport and deliver a majority of the corn stover, another key item was in play: the short- and long-term economics for the local market.

As we mentioned in a previous post, within a 50-mile radius of York, Nebraska, there is an estimated 2.5MM tons of ag residue from the corn fields. We will deliver 100,000 tons for this year’s supply. But that is just eight percent of the available residue. Eight percent. So 92 percent is just lying there – literally – waiting to be harvested.

So, let’s say the harvest amount jumps to 15 percent or 20 percent. To harvest it all takes equipment and manpower. And that means jobs. A lot of jobs.

With such enormous potential, PTUSA announced in 2015 that they would build a plant in York, to process and pelletize the ag residue, adding value to local corn, energy and animal producers. In April 2016, construction began, and the plant went online in late November 2016. The project created construction jobs. And, now that the plant is open, there are jobs available at the facility.

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And then – there’s the trickle-down effect. It means jobs in the local market to handle it all. From grocery stores, to cafes, to hotels. Plus it means other jobs, such as trucking and construction.

And then there’s the tax revenue. It goes back into the local economy, generating millions of dollars for the community.

Collection and removal of ag residue is also a new source of revenue for the local farmer. Farmers receive money for every ton of ag residue collected and baled. With the price of corn today being on the downside, that’s money that can help a farmer’s bottom line.

(There is another value, too: taking the ag residue off the land. But we’ll save that for a later post.)

And, just think for a second. What I described is just one local market.

What is the term? Think global, act local?

Think of how much stover is available each year across the Heartland. A lot. As far as the eye can see. So, if there is about 2.5MM tons of residue for every 50 miles, what if there was a plant like York every 50-100 miles? Think how it could drive the economics in those local markets.

Then think, how much stover is available in Nebraska? Or Iowa? Or Kansas?

You get the (big) picture. The potential is huge.

If you start to imagine every harvest season, the symphony of Challenger and Massey Ferguson tractors, flail shredders, Hesston balers running across fields clearing residue and stackers building giant walls of bales at the field ‘s edge. Then trucks transporting the high-density bales to the factories producing pellets for feed stock or fuel – or things we’ve yet to even imagine – you can start to see how this “trash” may be the engine to revive local economies.

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Best of all, its an annual event. It’s renewable. It’s green, and it’s clean.

And with the help of AGCO’s Biomass Solutions team, it could be the answer to a lot of prayers across numerous farming communities.

 

You Need How Much?

 

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By Glenn Farris

What do you do when your business plan calls for over 100,000 tons of densely packed corn stover … and you will process that quantity of corn stover every year–adding value to the local economy in a sustainable way?

It’s not like you can call your local supplier to fulfill the order. No one has that volume of square bales available.

That was the challenge Pellet Technology USA’s (PTUSA) founder Russ Zeeck and Business Strategy Manager Joe Luna faced when they were mapping out their idea for a new company, just a few short years ago.

Luna came to PTUSA from the West Coast. There, he worked in ag, finance and technology. He knew of AGCO and our industry expertise.

He heard that AGCO had been perfecting the process of collecting large quantities of stover and making them into high-density bales. That early work was mainly being done to in the energy market.

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Zeeck then stepped in.  A 30-year vet of the ag and energy industries, he drove and developed his idea to create pellets from corn stover for use as a green energy supplement or as a consistent animal feed product.

But the numbers that came out of the production equations were staggering. Could they actually secure this volume of stover? How would it be harvested? How would it be transported to the facility for processing? Most importantly, could it be delivered year-over-year?

There were so many moving parts that had to be coordinated. Who has the equipment, technology and expertise to make it happen?

“I knew of AGCO from previous projects,” said Luna. “So when we met, they came at this project with the attitude of a partner. They not only have a lot of equipment but they also have a lot of expertise. Remember, we’re still a young company. But to be successful, my thinking was to ‘stand on the shoulders of giants.’ AGCO has several hundred thousand tons of experience, and we wanted to build on that.”

So, the AGCO Biomass Solutions team went to work. Together with the PTUSA team, we mapped out the strategy to secure the plentiful ag residue. From providing the hundreds of pieces of equipment needed from Massey Ferguson tractors, to Hesston windrowers, Hesston high-density square balers, and finally, transportation, our strategy took shape.

Our goal is to help our customers – like PTUSA – create something. And that “something” is changing the way that we think about ag residue.

PTUSA is  creating a business of collecting what used to be considered “trash” in the fields – that left over corn stalk material. In the past, farmers would collect it and use it as bedding for their livestock or to cover the dirt floors of their barns. Or, they would just till it back into the ground. We’ve now found this practice does more harm than good (more on that in a later column).

Once we map it all out, it’s quite literally a “symphony” of collecting the “trash” across a 50-mile radius of fields in Nebraska. But, there is just a 30-60 day window for the AGCO Biomass team to do it all – cut, windrow, bale, pick-up and deliver. And, we’re on track to do just that.

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It means that the 100,000-plus tons of high-density bales that the PTUSA team was imagining – which will fill a 50-acre field, seven bales high – will be sitting next to their new facility in York, in just a few short weeks. And, it’s enough stover to last all year long. Sixty days of hard work for a year’s worth of supply? Not too shabby.

We’ve solved that problem. However, knowing that within a 50-mile radius, there is estimated to be 2.5MM tons of available ag residue, it begs yet another question on this biomass project.  What impact would it have on the local economy, if we could harvest that 2.5MM tons?

We’ll look at that next time.

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The increasing benefit and necessity of efficient residue management in your fields

Come fall, you’ve put in almost a year’s worth of toil and sweat to reap a plentiful harvest. When that time comes, the next thing on your (or any farmer’s) mind is the crop residue left behind.

As efficiency in farming techniques have increased, production and stalk size have as well. Such a plentiful result leaves similarly plentiful stover. Managing stover and maintaining yields in  subsequent harvests is becoming more and more challenging. Farmer has to manage their own residue, and it is a tedious and inefficient process presently. Too much stover can limit seed choices, require more tillage, limit planting populations, affect plant emergence, require increased spraying, and most importantly, hinder grain yield.

There is, however, another way to channel the byproducts of your harvest, which can not only benefit you financially but, can also contribute to the health of your fields, livestock, and subsequent harvests.

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Those seemingly lifeless leaves and stalks, your stover, left languishing in your field after the previous harvest could become quite valuable as processes of energy conversion, feedstock, and a great many other applications continue to improve.

As innovations to handling, baling, and converting stover become more and more viable, it’s important for farmers to stay on the cutting edge of these developments for the future.

But you may have heard such practices, while allegedly profitable, can harm soil and cause issues to crop yields.

Years ago that may have been the case. Lighter corn yields meant less stover and less likelihood for problems. Soil damage and erosion are a constant concern. But we have learned that in many cases, the benefits of pulling some of the stover from the field are far from detrimental.

The science has improved significantly. It’s been shown that it is beneficial to remove some of the stover from the field. Not to mention in an agricultural climate where global surpluses have left many crops (particularly corn) at prices well below that of production, finding another means of income is vital.

But what are we really talking about? It’s simple, really. Plant and harvest as you always would. The same way you, and your father, and grandfather before him did. Following the harvest, however, you need only collect and densely bale the remaining stover. And if that sounds daunting, that’s where AGCO’s Biomass Solutions team can help you get it done.

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Then of course comes the question – “What exactly do you do with it?” There are a number of companies that can utilize and add value to your stover. One such company that removes and bales densely packed stover is Pellet Technology USA (PTUSA). They convert the baled stover into feed pellets for your livestock, high in fiber, protein, energy and other nutrients essential to a healthy diet. These pellets provide a necessary source of food, with a key ingredient from the residue residing in your fields.

These feed pellets provide options for overwintering beef cowherd and/or ration inclusion in starter, grower and finishing rations.

Stover can also be converted to energy pellets. These “power pellets” are then sent to biorefineries for conversion into biofuels, particularly ethanol. There is currently a growing demand for such pelleted residue to produce these fuels, as the market for alternative fuel sources continues to grow.

When weighed against all factors, residue management will become a necessary step farms must take to remain profitable and healthy in today’s precarious agricultural climate.

And as innovations and processes for stover removal, baling, and conversion continue, more and more companies will join this movement to give farmers the necessary incentives to consider selling their ag residue.

The stover is there. Now we must develop the infrastructure to catch up.

We mentioned PTUSA above as one of the industry leaders in stover removal, dense baling, and pelleting. Next time we’ll be venturing more into what is done, the marketplace, and how farmers will greatly benefit from the services they provide.

Stay tuned for that post in the coming weeks.

Factory Farms Drive Technology Adoption and Sustainability Improvements

By Chris Rhodes

There was a refreshing op-ed piece in the New York Times a few weeks ago.  Typically when city-based media focus their energy on agriculture, the focus is on organic labels, artisanal foods, and craft beers – forgetting about the real work of feeding a growing population of seven billion people.  In the article, author Jayson Lusk talked about how technology is enabling fewer farmers, on less land, with a smaller environmental footprint get the work done to feed more people better food.  He highlighted that in the 1950’s farm technology would have required 180 million acres to produce the same amount of soy that is produced on 80 million US acres today, and that it would require a whopping 308 million acres to produce the corn that is currently grown on 80 million acres.  Without the technology that creates this kind of efficiency, we would not be able to feed the current population—80% of whom now live in cities.

In addition to the focus on productivity, it was nice to see an article that admits that there is no group of people who love the land more, and are better stewards of the land, than farmers.  Jayson points out that the term ‘Factory Farm’ is generally used as a pejorative, but that most farms are actually still owned by families.  He also points out that it is precisely the attention to detail, and the scale of the ‘Factory Farm’ that allows for the technology development and use that drives down the ecological cost of farming while still feeding the world.  It’s these larger farms that are driving the adoption of technology that reduces the use of water and chemicals and that allows for the low- and no-till cropping that has reduced soil erosion 40% since the 1980’s.

Finally, Jayson alludes to the immense complexity that comes with bringing together a bunch of different types of technology.  That complexity remains one of the main stumbling blocks of technology adoption, but not one that can’t be overcome.  A continued focus on driving technology through mobile devices and on connecting technology more openly will ensure that the strides we are making with technology will continue to deliver the productivity and environmental benefits we have been seeing over the last couple of decades.

For more information about how AGCO solutions are helping growers large and small become more efficient, visit www.AGCOcorp.com/Fuse.

Chris Rhodes is the Global Director of Commercial ATS (Advanced Technology Solutions) and Partnerships for Fuse®, AGCO’s next generation approach to precision farming. Chris helps ensure the delivery of Fuse technologies and services to our customers and the advancement of the Fuse open approach through industry partnerships and strategic alliances.

IoTF: The Internet of Things for Farming

By Timothy Chou

AGCO is excited to have guest blogger Dr. Timothy Chou of Stanford University join us on the Fuse Blog

Some of you have heard about the Internet of Things. While many will wonder why a coffee pot needs to talk to a toaster there is even greater potential in using advanced software, machine learning, and cloud computing to transform the planet’s fundamental infrastructure and build precision machines. In this blog we’ll focus on the benefits of using these precision machines to enable precision industries, whether that’s farming, mining or transportation.

 

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Precision Machines

So what are the benefits of precision agricultural machines to the farmer, or more generally what are the benefits of precision machines to the businesses that use these machines? We are going to discuss two of these benefits in this blog.

Lower Consumable Costs

Many machines consume materials during operations. This could be fuel in the case of an airplane, ink for a high-speed printer or chemical reagents in a gene sequencer. These consumables often form a large portion of the operational cost structure. As anyone with an inkjet printer knows, the cost of the printer is not near as much as the cost of the toner cartridge you buy every year before tax day. At the enterprise level in the airline industry, the single largest operational cost is fuel – in some cases that’s nearly 30 percent of the total cost of the flight.

In the railroad business New York Air Brake has engineered a product to help operate trains more precisely.  This product, called LEADER, is being used by Norfolk Southern railroad, which operates in 22 eastern states. They attribute a five percent fuel savings to their deployment of LEADER, resulting in not only 10.8 million gallons of diesel fuel saved per year, but also the avoidance of more than 109,500 metric tons of greenhouse gas emissions.

Improved Safety

The derailment of an Amtrak train in Philadelphia in 2015 left at least six people dead and created chaos on the heavily traveled Northeast corridor the next morning, cutting off all direct rail service between Philadelphia and New York City and causing many other delays up and down the east coast. But if you can tell the train operator what to do, it’s a short step to just having the computers do it.

In 2016, the first automated train will run from the north of Australia to Perth to deliver iron ore.  Not only will it reduce their costs as they railroad has to spend $300,000 in salary for these operators, but also reducing human error will result in a safer railroad.

While technology is cool, its real usage has been to transform businesses. We’re all familiar with the examples from the consumer space (Google, Uber, eBay), but IoT technology has the potential to do the same for producers and consumers of the machines used in agriculture, healthcare, power, transportation, water and more. For a manufacturer of Things, technology can not only reduce the cost and improve the quality of service, but also deliver new revenue sources. As a consumer of this next generation of Things, you have the ability to use precision machines to deliver higher quality and lower cost food, power and water, and safer and lower cost transportation and healthcare.

For more information about IoT and how it might reshape your business check out the recently released book Precision: Principles, Practices and Solutions for the Internet of Things.

For more information about AGCO’s own Internet of Things for the Farm (IoTF), visit www.AGCOcorp.com/Fuse to learn about our precision farming technologies and services.