BB P update - wbga.org · study and business plan by the Barley Bioproducts ... extracting and...

Barley can compete study findsBBOP demonstrates barley is a legitimate crop platform

for biofuel production in Western Canada – and that it can do more than just produce ethanol

Barley CAN compete as a biofuel.That’s the bottom line of a comprehensive feasibility

study and business plan by the Barley BioproductsOpportunities Project (BBOP). The Alberta BarleyCommission and the Western Barley GrowersAssociation launched BBOP in May 2007 to discover bar-ley’s potential as a crop platform in the rapidly emergingsector of biorefining.

From the beginning, theproject has looked beyondjust ethanol production,delving into the technicalfeasibility and market po-tential of other barley biore-fining products such as distillers grains and value-added components such asbetaglucan and antioxi-dants.

“We have several goodstories to tell. New process-ing technologies are makingbarley biorefining muchmore competitive and at-

tractive for producers and investors,” BBOP project man-ager Carman Read says. “Plus, markets for renewableenergy and high-quality food and feed are growing sig-nificantly every year in Canada and around the world.”

“This is an extremely good time for the barley industry to get into biofuel production,” Brian Kelly says. His firm, Kelwin Management Consulting ofWinnipeg, compiled BBOP’s feasibility study and business plan with Shambrock Consulting Group Ltd.,also of Winnipeg. “One reason is farm-based investorscan offset a significant portion of their start-up

BB Pbarley bioproducts

opportunities project

costs with funding from various government programs.”Kelwin and Shamrock’s report recommends starting a

barley biorefinery with a base model, or initial building

update

continued on page 2…

SEPTEMBER 2008

Carman Read

He adds more work re-mains: “To quote WinstonChurchill: ‘Now this is notthe end. It is not even thebeginning of the end. But itis, perhaps, the end of thebeginning.’ It’s clear weneed more research and weneed it to be shaped by producers, investors and or-ganizations already in thebusiness and/or looking atentering the business.”

“This kind of value-added project is an opportu-nity for farmers to gain sta-bility and control – it’s a wayfor them to be at the front-lines of changes in agricul-ture rather than at the side-lines,” Jeff Nielsen, presi-dent of the Western BarleyGrowers Association, says.

Leslie adds: “We are al-ways looking for ways to ex-pand demand for barley andadd more value to farmersand our customers in ourmajor markets – feed, malt,food and industrial.”

B A R L E Y B I O P R O D U C T S O P P O R T U N I T I E S P R O J E C T| 2 |

Mike Leslie

Jeff Nielsen

Study finds barley can compete…continued from page 1

block. Over time, investors could expand to the opti-mized model envisioned in the report; expansion can bedriven by opportunities created by ongoing research,new technology or strategic partnerships.

One of the report’s key findings is that the base modelwould be profitable and provide debt coverage and freecash flow to secure financing for investors and supportfuture business development (with or without partners).

Among the areas that could lead to an optimizedbusiness are:

• Adopting innovative technology to utilize barleyscreening and hulls to reduce plant energy costs

• Isolating, extracting and marketing higher-valuebarley fractions

• Optimizing the use of byproduct starch (producedby strategic partners focussed on barley fractions)to improve ethanol production.

“BBOP demonstrates barley is a legitimate crop plat-form for biofuel production in Western Canada – andthat it can do more than just produce ethanol,” MikeLeslie, the CEO of the Alberta Barley Commission, says.“Now we’re going to share and test our findings withproducers and industry. Our next steps will depend onthe information and research they need to make barleya crop platform of choice for biorefining.

We made our project as comprehensive as we couldjust the funding and time available to us. Our projectsponsors and partners are very satisfied with the depthof our research, and our report provides well-researchedanswers and is full of practical information.”


Why Process Barley?Advantages of barley as a crop platform

for biorefining in western Canada:

1. Western Canada has a large (andoften surplus) supply of barley

2. Barley is a good crop platform itgenerally is less expensive to growon a per bushel basis and hasstrong agronomic performanceacross most of the Canadianprairies

3. New enzymes and processingmethods convert barley starch toethanol More effectively and moreaffordably than previously

4. Barley is proven: large scale plantsusing barley as a crop platform arecurrently operating in Sweden andSpain; Osage Bio Energy is movingahead with plans for four new in-tegrated barley plants in the east-ern U.S.A.

5. Distillers grains from barley arelikely to have more protein and abetter balance of amino acids thandistillers grains from corn. Distillersgrains from barley will likelycompete well with canola mealand, in some cases, with soy meal,

says Randy Baldwin of KelwinManagement Consulting

6. Barley biorefining is a strategic ap-proach to building better marketsfor barley while also creating amore sustainable livestock industry

7. Barley’s existing germplasm provides an excellent base for developing high-yield, high-starchvarieties. Virginia PolytechnicInstitute has already developedthree high-starch varieties specifi-cally for biorefining in the easternU.S.A.

8. Additional research will reinforceand/or broaden the potential ofbarley’s value-added components(including beta glucans, proteinand tocopherols) and the scope oftheir markets. A geographicallylarge, economically sizable and di-verse market already exists and in-cludes functional foods, traditionalfood products, supplements andnatural health products in Canada,the U.S. and Japan.

BARLEY THEN – AND BARLEY NOW

Previous barriers to using barley for biorefining

Overcoming the barriers to using barley for biorefining

Barley’s high level of beta glucans resulted in a highviscosity mash requiring increased processing andhandling times and costs.

New enzymes reduce viscosity caused by high betaglucan level.

High beta glucans also resulted in reduced-valuedistillers grains that were restricted to the ruminantlivestock market.

New enzymes break down beta glucans forprocessing, resulting in distillers grains with lowerbeta glucan levels.

The United States did not have the volume orconsistency of barley needed for large-scale processing.

Western Canada has the volume and consistency ofbarley needed for large-scale processing.

Plants using barley had to process large volumes ofnon-starch materials, leading to bigger, costlierfacilities.

New processing methods (dehulling, beta glucanconversion and lower temperature fermentation) arebringing new efficiency to barley plants.

Abrasive barley hulls increased the maintenance anddecreased the life of plant pumps, pipes and valves.

Improved dehulling prior to fermentation removesmost abrasiveness and retains most starch.


Barley biorefining as one expert sees itThe biggest mistake in U.S. [biorefining] was

producers forgot that about half of what comes out of their plants is animal feed

Phil Madson has a few words of advice for businessesand investors considering barley as a crop platform forbiorefining.

Look beyond ethanol production, the president ofKATZEN International says. In the past 50 years, KATZENhas designed more than 150 biorefineries around theworld that use crop platforms ranging from corn andbarley to cassava and sugar cane.

Madson and other KATZEN employees jokingly referto companies focused solely on ethanol production as“alcoholics.”

After 25 years in the biorefining industry, Madson res-olutely believes any model for a barley based biorefinery

has to generate revenue from both premium livestockfeed (from distillers grains) and ethanol.

He says the majority of the corn-ethanol industry hasbeen so ethanol-focused that it cared little about its dis-tillers grains, and has routinely sold them for half of thetrue nutritional value.

“The biggest mistake in U.S. [biorefining] was produc-ers forgot that half of what comes out of their plants isanimal feed.”

When Osage Bio Energy recently came to KATZENwith plans to build multiple barley-based biorefineries inthe south eastern United States, Madson says his com-pany responded with an aggressive animal feed pro-gram.

“Their model now is to produce a high-protein, high-quality animal feed . . . which is more stable for turkeysand swine,” Madson says. “They’re certain to get a pre-mium price for their distillers grains.”

An integrated biorefining model requires a focus thatestablished, traditional ethanol producers would scoff at:the most valuable product becomes distillers grains, andethanol becomes a major “byproduct.”

“The secret to a barley plant is to recognize that yourmost important product is the animal feed co-product. Agallon of ethanol is a gallon of ethanol – it’s exactly thesame as everybody else’s,” Madson says, emphasizingthe nutritional profile of distillers grains varies by cropplatform and variety, thereby creating unique productsand distinct competitive advantages.

He adds: “He who serves animals wins. And he whokeeps his animals at home and feeds them from his plantwins more.”

While the North American ethanol industry has fewsuch integrated models, some shining successes exist, in-cluding, Madson says, several barley and wheat facilitiesin Europe and the Poundmaker biorefinery at Lanigan,Saskatchewan. Poundmaker has demonstrated howhaving a feedlot next to a biorefinery can reduce costsand improve feed efficiency.

Of course, Madson says a successful barley model in-volves other important factors, beginning first and fore-most with knowing where you can create and capturevalue.

As well, currrent and future developments in enzymetechnology promise at least partial conversion of barley’sbeta glucans to fermentable sugars which will not onlyincrease ethanol yield from barley, but also further in-crease feeding value of barley distillers grains.

Madson says experience has shown farmers increas-

KATZEN’s barley biorefineriesUsing highly proprietary technology, KATZEN has devel-oped plants for:

• Abengoa Bioenergy’s Bioetanol Galicia and Castilla YLeon plants in Spain, were designed and built toprocess barley and wheat, although the Galicia planthas also operated on corn and milo for economicreasons. Similarly, an Abengoa plant in Cartagenaproduces 100 million litres/year of ethanol from bar-ley or wheat. KATZEN president Phil Madson says aplant designed to use barley as its crop platform caneasily be converted to process wheat or corn.However a plant built for corn production requiresextensive and expensive retrofitting and additions touse barley or wheat effectively. “It’s like trying toprocess oil from the oil sands in a facility made forlight crude processing”

• Osage Bio Energy, which recently announced plansto build multiple KATZEN-designed plants in theeastern U.S., will use barley as the feedstock. Eachplant will have more than 200 million litres of annualcapacity and cost an estimated US$160 to US$170million.

KATZEN also has other barley-based facilities in theplanning stages in Canada and elsewhere.


Barley’s first step in biorefining:proving technical feasibility

BBOP’s technical research team found barley has several abilities and advantages as

a competitive crop platform

The first phase of the Barley BioproductsOpportunities Project (BBOP) was purely technical.

In May 2007 a team of researchers and analysts setout to determine if barley was a suitable crop platform,or feedstock, for biorefining. Within months they foundbarley’s potential is considerable. It could be used in

everything from functionalfoods to health and well-ness applications to indus-trial applications such asethanol for fuelling vehiclesand distillers grains for live-stock feed.

Previous research had re-vealed various high-valuecompounds in barley, butbaseline information waslacking, especially analysison fermentation and dis-tillers grains from barley.Furthermore, it was unclearwhat effects biorefining

processes would have on barley’s high-value compo-nents (tocopherols – better know as the building blocksof Vitamin E – phenolics compounds, fatty acids and pro-teins).

BBOP’s technical research team found barley has sev-eral abilities and advantages as a competitive crop plat-form (or feedstock) in biorefining. Researchers Drs. DavidBressler, Ruurd Zijlstra and Jonathan Curtis, all with theUniversity of Alberta’s Faculty of Agricultural, Life andEnvironmental Science (previously Agriculture, Forestryand Home Economics) found:

1. New modified low temperature processingmethods of the barley varieties tested resulted in

starch to ethanol conversion ratios similar tocorn and wheat

2. The analysis of the distillers grains found thebarley varieties tested yielded less residual starchthan the corn tested

3. The distillers grains produced from barley vari-eties tested have a high in-vitro digestibility anda high crude protein content

4. Low temperature processing methods preserved(and in some cases concentrated) high-valuecomponents such as phenolics, unsaturatedfatty acids, tocopherols, trienols and sterols

5. Researchers found modifying the cold hydrolysissystem of converting barley starch to fer-mentable sugars, known as the Stargenmethod, yielded higher results

6. Laboratory-scale analysis of the dried distillersgrains solubles (DDGS) found barley had in vitrodigestibility and residual starch content at leastsimilar to corn. By comparison, corn was highestin crude fat and lowest in crude protein and invitro digestibility; wheat was highest in crudeprotein

7. Potential co-products of barley biorefining in-clude protein, fibre, fatty acids and tocols

8. The Stargen method of fermentation, whichuses a new line of enzymes, reduces the heatneeded for processing (potentially lowering op-erating costs and increasing profits)

9. This method also exposes distillers grains to lessheat, which may result in undenatured proteins(undenatured distillers grains’ proteins are worthtwo to three times more than denatured pro-teins).

Dr. David Bressler

Barley biorefining as one expert sees it…continued from page 4

ingly benefit from devoting a portion of their acreage togrowing crops for local, defined and stable marketsrather than gambling on more volatile local or exportmarkets.

“I believe the next wave [of biorefining] will includethe Great Plains (in the U.S.) and Western Canadaadding value to their barley and wheat.”


Barley biorefining would go beyond ethanol production

Ultimately, the optimized biorefinery business model would take advantage of all the components in barley

to capture full value for the business

The Barley Biorefinery Opportunities Study outlineshow a barley-based biorefinery could, theoretically, beestablished and then expanded to capture barley’sunique competitive advantages.

The initial “base model” business calls for a facilitythat produces and markets ethanol, distiller’s grains andother co-products. Over time, the business would addimprovements to increase processing yields, decreaseprocessing costs and develop new business initiatives fo-cused on new revenue streams. In the study, each aspectof development is referred to as a new business model.

“Ultimately, the optimized biorefinery business modelwould take advantage of all the components in barley tocapture full value for the business,” Carman Read, man-ager of the Barley Bioproducts Opportunities Project(BBOP), says.“

The base model, the initial processing facility,would be immediately viable, producing ethanol fortransportation fuel, distiller’s grains for livestock feedand carbon dioxide for industrial and food uses.

The second business model would add biomasscombustion to the plant to reduce or even replace theneed for electricity and/or natural gas. (Screenings andhulls would be burned to produce energy.) This modelwould also see the production facility expand to extractseveral important chemical compounds (tocopherols,sterols, phenols and fatty acids) from wet distillers grainsafter distillation and prior to drying. The study points outadditional research is needed to determine the commer-cially feasibility of extracting compounds.

The third business model is based on extractingadditional compounds, some from the barley kernel andthe “beer” produced during fermentation. These highlyspecialized operations would likely require a partner or

BarleyCleanBarleyCleaning

DryDistillersGrains

Wet DistilGrains

DryingExtraction

PlatformChemicals

Barley Biorefpartner #1 – adthird business

Screenings Hulls

Biomasscombustion– added in

second businessmodel

Bran

BioactiveCompounds

OPTIMIZED BARLEY BIOREFINERY MODEL


strategic alliance with expertise in processing technol-ogy, marketing and high-value compounds.

The fourth business model would add a secondstrategic partner focused on extracting high-value com-pounds such as beta glucans from barley. Such extrac-tion processing is likely to produce very high purity resid-ual starch, which the biorefinery could secure through abusiness arrangement with the partner to improveethanol and overall plant operations at the biorefinery.

“We believe the optimized business model is a sound

and realistic approach and our study outlines in detailhow to manage process flow,” David Shambrock ofShambrock Consulting Group Inc. says. “Our view iswith this sort of business development a barley basedbiorefinery will generate more and more opportunitiesfor plant investors over time.”

“Biorefining is at the point crude oil was in the 1920s. . . a whole line of petroleum-based products were justbeing discovered and produced,” Brian Kelly of KelwinManagement Consulting says.

CO2Fuel-grade

Ethanol

Ethanol RawMaterial

llerss

EthanolProcessing

g

finery dded in s model

Barley Biorefinery #2 – added in fourth

business model

ConcentratedStarch

Non-StarchFractions

Energy

OtherProducts

Dehulling/Pearling/SizeReduction

OtherProcessing

Extraction

Legend

Input materials

Key in-process materials

In-process by-products

By-product energy source

Product flow

Processing stage

End product

Collection point

Barley BioRefinery strategic “partner”

Detailed explanations of the four

business models are in the complete

Barley Biorefinery Opportunities Study.

For a copy contact:

The Alberta Barley Commission

e-mail: [email protected]

Toll-free in Alberta: 1 (800) 265-9111

Phone (403) 291-9111


Government funding for biofuel developmentProducers and investors interested in developing biofuel

facilities may be able to offset costs with funding from anynumber of government programs, including those mentionedbelow. A detailed list of government biofuel programs is in

the Barley Biorefinery Opportunities Study.

ECOENERGY FOR BIOFUELS INITIATIVE

The Government of Canada’s ecoENERGY for BiofuelsInitiative will invest up to $1.5 billion to increaseCanadian biofuel production. Through ecoENERGY, bio-fuel producers can reduce some risks of developing pro-duction facilities, namely fluctuating feedstock and fuelprices.

The program runs to 2017. Eligible recipients can re-ceive funding for up to seven consecutive years providedthey are a for-profit legal entity that owns and producesor has advanced plans and strategies for building a re-newable energy facility.

Incentives will be paid on every litre produced and cal-culated by subtracting the profitability margin from theindustry margin. The government has set the profitabil-ity margin for renewable alternatives to gasoline for nineyears at $0.29/litre; the profitability margin for renew-able alternatives to diesel for the first year is $0.32/litre.Incentives will be paid quarterly.

ECOAGRICULTURE BIOFUELS CAPITALINITIATIVE

The federal government’s ecoAgriculture BiofuelsCapital Initiative (ecoABC) is a $200-million, four-yearprogram running to 2011. It provides repayable contri-butions for the construction or expansion of transporta-tion biofuel production facilities.

Agricultural producers must invest a minimum of 5%and the project must use an agricultural feedstock toproduce biofuel. Increasing percentage ownership byagricultural producers increases the funding available forcapital costs. A maximum of $25 million per project or25% of eligible capital costs applies.

SASKATCHEWAN BIOFUELS INVESTMENTOPPORTUNITY

The Saskatchewan Biofuels Investment Opportunity(SaskBIO) program offers up to 5 cents/litre (to a maxi-mum of $10 million per project) in repayable contribu-tions to build or expand renewable biofuels facilities in

Saskatchewan. The $80-million project is open to corpo-rations (including cooperatives), individuals or partner-ships with a minimum of 5% Saskatchewan ownership;and new or increased production of at least two millionlitres a year.

Funding is contingent on production; the programruns for four years beginning April 1, 2008.

BIOREFINING AND COMMERCIALIZATION/MARKET DEVELOPMENT PROGRAM

One of several Government of Alberta programs inthe province’s Bioenergy Plan, the Biorefining andCommercialization/Market Development Program has$24 million available in 2008/2009 for expanding or de-veloping biorefining in Alberta.

For biorefining development, funding can be appliedto a maximum of 50% of eligible costs for feasibilitystudies, business planning and worker training, or for upto 20% of capital costs.

The program will also fund up to 50% of technologydevelopment and commercialization and/or market de-velopment costs.

BIO-FUEL AND BIO-GAS PRODUCERCREDIT PROGRAM

This four-year Government of Alberta program, alsopart of its Bioenergy Plan, runs to March 31, 2011, andsupports the Alberta production of biofuel or biogasfrom agricultural or forest biomass.

Funding is 9 cents/litre (to a maximum of $20 milliona year) for plants with capacity of 150 million litres ormore a year; 14 cents/litre (to a maximum of $15 milliona year) for production from plants with capacity of 150million litres or less a year.

Applicants must produce certified fuel-grade biofuelor biogas on a commercial basis in an Alberta facility. Aswell, they must record and report the energy content ofprojects powered by dual or multiple sources, and calcu-late the corresponding net eligible production.


Manitoba consultants conducted business feasibility and plan

The business model we created represents a value chain – 85 per cent of which exists right now

Kelwin Management Consulting and ShambrockConsulting Group Inc. conducted the research for theBarley Biorefinery Opportunities Study (Phase 2Feasibility Study and Phase 3 Business Plan). Their thor-ough final report reflects the depth and breadth ofknowledge they possess in business, agriculture and pro-cessing.

Both companies are based in Winnipeg, but their ex-perience extends across Canada and to a number ofother countries.

Kelwin Management Consulting providesclients in several industries a variety of planning, analyti-cal, developmental and commercialization services. Thecompany’s clients include the Ag Waste ManagementCorporation; Alberta Agriculture, Food and RuralDevelopment; the Alberta Barley Commission; AlbertaEgg Producers; Farm Credit Canada; the RichardsonCentre for Functional Foods & Nutraceuticals; and theSaskatchewan Agriculture Equity Fund.

Kelwin’s principals, Brian Kelly and Randy Baldwin, ledthe company’s activities in the barley study.

A professional agrologist and certified managementconsultant, with a master’s in business administration,Kelly established the company in 1992 as KellyAssociates. Since then he has worked with hundreds ofcompanies on the Prairies and across the country andhas been active with the Canadian and Manitoba cham-bers of commerce. Previously, Kelly founded EnvirosysInc., a recycled packaging business; chaired Kipp Kelly,which manufactured food processing and density sepa-ration machines; and was a practice director withDeloitte Haskins & Sells. From 1976 to 1985, he was aregional manager for the Bank of Commerce.

“The business model we created represents a valuechain – 85 per cent of which exists right now,” Kellysays. “One of the challenges for producers in a valuechain is how to get value out of it. Because this projectwould be producer-led, farmers have the opportunity tobe a shareholder in numerous companies.”

Baldwin joined Kelwin Management Consulting in1994 after running Dandy Dairy in St. Malo, Man.Previously, he worked with May & Baker Canada Inc. inthe agrochemicals division as well as with the AlbertaWheat Pool’s crop chemicals division. Baldwin earned abachelor of sciences in agriculture from the University ofManitoba in 1975 and became a certified managementconsultant in 2000.

Baldwin’s work on the study focused on distillersgrains. “Distillers grains would initially be about 15 percent of a barley biorefinery’s revenue but their valuewould change as optimization is reached and valuablefractions are extracted from them,” Baldwin says.“Barley distillers grains are high in protein – and proteinmarkets around the world are growing.”

Shambrock Consulting Group advises compa-nies in the agri-food sector on managing, marketing, re-search and development, and technical services andworks in valued-added processing across Canada and inthe United States, India and Ireland.

Shambrock himself has also been the executive direc-tor of the Manitoba Food Processors Association since1993. Prior to that he was interim director of theNational Agri-Food Technology Centre (1991 to 1993)and director of marketing for the Manitoba ResearchCouncil (1989 to 1991). He has also worked with theCanadian Food Products Development Centre, theNational Research Council of Canada and Lucerne FoodsLtd.’s dairy division.

In addition to bachelor’s and master’s degrees in foodscience, Shambrock also has a master’s of business ad-ministration, all from the University of Manitoba.

“Our report demonstrates barley is a feasible cropplatform for bioproduction – and our research clearlypoints out that if farmers want to capitalize on this op-portunity they should act now,” Shambrock says.

BBOP’s business researchers: Randy Baldwin (left) and Brian

Kelly (centre) of Kelwin Management Consulting and Brian

Shambrock (right) of Shambrock Consulting Group.

Biofuel news and outlooksThe Freedonia World Biofuels Market Report

predicts global demand for biofuels will approach 90million metric tons in 2011. That represents a 20 percent increase every year for the next three years.

________________________

In its 2008 North America Biofuels Report in-dustry analysts Frost & Sullivan said biofuel sales reachedalmost US$10 billion and forecast revenues would ex-ceed US$18 billion by 2012.

The company notes: “There is a strong venture capi-tal investment climate in the next-generation biofuels,which are expected to be more efficient, using algae,waste, straw, wood, and other forest-based inputs thatcan be found in abundance in the United States.”

Biofuels production by country, 2007Total

Ethanol Biodiesel biofuels________________________________________________(in millions of litres)

United States 26 500 1 688 28,188Canada 1 000 97 1,097European Union 2 253 6 109 8,361Brazil 19 000 227 19,227China 1 840 114 1,954India 400 45 445Indonesia 0 409 409Malaysia 0 330 330Others 1 017 1 186 2,203________________________________________________World 52 009 10 204 62,213Source: OECD Economic Assessment of Biofuel Support Policies,

2008

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General Motors promotes alt fuelsSpeaking at the Globe Conference 2008 this past

spring, Beth Lowery, General Motors vice president ofEnvironment, Energy and Safety Policy, said: “One way[GM is] working to reduce oil consumption and CO2emissions, is by changing the fuels – offering vehiclesthat run on alternative fuels, such as ethanol . . . and,very importantly, by promoting the development of im-proved alternative fuels, such as cellulosic ethanol.

Why ethanol? E85 ethanol helps to reduce green-house gas (GHG) emissions.

It also helps to improve vehicle performance, becauseE85 ethanol has a higher octane rating than gasoline.This enables more horsepower and torque.”

________________________

Suncor Energy’s St. Clair Ethanol Plant is ex-panding to double its production of cleaner-burning, re-newable energy, thanks to a $25 million investment by

the Government of Canada’s and equity investmentfrom farmers totaling $12.5 million.

The St. Clair plant will double its capacity to 400 mil-lion litres per year by September 2009. This expansionwill create new opportunities for farmers who are grow-ing the feedstock to produce the ethanol, as well newopportunities for those who are involved as financial andbusiness partners in the plant’s expansion.

In addition to ethanol, the plant will produce drieddistillers grains with solubles (DDGS), sources of high-protein and high-energy feed for dairy and beef cows,hogs and poultry, as well as carbon dioxide (to freezefoods and produce carbonated beverages and fire extin-guishers).

________________________

Osage Bio Energy (OBE) recently announced it hasreceived $300-million to build four next generation bio-refining facilities that will produce ethanol and a spe-cialty protein feed. OBE will differentiate itself from tra-ditional Midwestern corn-to ethanol production compa-nies in several key ways.

First, the ethanol will primarily be produced from re-gionally grown barley and will be an advanced biofuel asdefined by the Renewable Fuel Standard (RFS). Currently,in the U.S.’s mid-Atlantic and Southeast nearly five mil-lion acres per year remain fallow in winter months.Barley is a winter crop that will be grown for the produc-tion of ethanol and does not compete for land for foodproduction. OBE considers it an environmentally superiorto corn because it requires less fertilization and preventsnutrient runoff in winter months.

Second, OBE has negotiated an exclusive agreementwith KATZEN International, Inc., one of the leading andoldest privately held process design and technologycompany in the biofuels industry. The arrangement al-lows for exclusive use of KATZEN technology capable ofproducing ethanol from barley within a 200-mile radiusof each plant site.

Third, OBE’s site selection model provides significantenergy balance advantages over corn- based ethanol, es-pecially in the mid-Atlantic and Southeast. OBE is com-mitted to maximizing the opportunity to produce a trulyrenewable fuel by partnering with existing steam pro-ducers, utilizing its own waste products for energy andprocuring locally grown biomass.

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Global commodity price outlookSpeaking at the International Grains Council’s Grain

Conference in June 2008, John Johnson, the presidentand CEO of CHS Inc., said current market volatility haschallenged the global grain sector and consumers on

B A R L E Y B I O P R O D U C T S O P P O R T U N I T I E S P R O J E C T| 1 0 |


many fronts but ultimately will strengthen the industry’sability to serve worldwide customer needs.

“We are in a period of unprecedented complexity andchange. There are no easy answers,” said Johnson. “ButI believe as a result of the challenges we are facing to-day, we will emerge at a new level in terms of our abil-ity to respond to and meet customers’ needs.”

Johnson described current market conditions as a“perfect storm” produced by the convergence of in-creased global demand, especially from developingeconomies such as India and China; a shift in currencyvalues driven by a weaker U.S. dollar; growth of grainuse by biofuels; commodity market involvement by indexfunds; the impact of natural events like weather; and in-creased awareness of resources and sustainability issues.

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Whether the world is running out of oil is debateable.But it does appear the days of cheap, abundant oil areover. Oil prices have been at record highs for much ofthe past year. Although oil is the most traded commod-ity in the world, the New York Times Media Group re-cently reported seven major Western oil companies saw their production fall 650,000 barrels a dayin the second quarter of 2008.

“While that drop might not sound like much in aworld that consumes 86 million barrels of oil each day,today’s markets are so tight that the slightest shortfallspush up prices,” Jad Mouawad wrote.

Mouawad cited several reasons for the dip, including

less favourable contract terms, competition from state-run organizations, eroding influence and waning pro-duction in regions such as Alaska and the North Sea.Plus, it is getting harder – and more expensive – to findand extract new sources of oil.

Christophe de Margerie, the head of Total of Francerecently warned global oil supplies are unlikely to in-crease beyond 95 million barrels a day by 2020. Still de-mand is not expected to wane. Other sources of energywill be needed – and biofuels are one way of meetingdemand.

________________________

The Canadian Renewable Fuels Association(CRFA) promotes greater renewable content in trans-portation fuels, which are cleaner-burning and more sus-tainable fuels, and they mitigate against price increasesat the pump. With a feedstock-neutral approach, theCRFA supports the environmentally sustainable produc-tion of ethanol from a variety of sources, such as cornand wheat today, and not just cellulosic feedstocks in thefuture, but also the potential that other grains such asbarley have. Barley could not only provide another greatsource from which to make ethanol, but with the co-product of distillers grains being made in the ethanolproduction process, it could also help provide a high-pro-tein feed for the livestock industry. Barley-based ethanolcould be another piece of the puzzle in helping Canadagrow beyond oil.

Biofuel news and outlooks…continued from page 10

We gratefully acknowledge the support of ourfunding partners in the Barley BioproductsOpportunities Project (BBOP).

The Government of Canada’s BiofuelsOpportunities for Producers Initiative (BOPI)provided $262,500 of funding for BBOP through theAgriculture and Food Council, which administersAgriculture and Agri-Food Canada’s AdvancingCanadian Agriculture and Agri-Food Program. BOPI isa part of the Canadian Agri-Food Council’s AdvancingCanadian Agriculture and Agri-Food Canada (ACAAF)program.

The Alberta Barley Commission andWestern Barley Growers Association jointlymanaged the Barley Bioproducts Opportunities Project(BBOP) and provided in-kind support for the project.

One of the world’s leading agri-businesses,Syngenta is committed to sustainable agriculturethrough innovative research and technology. Syngentasupported BBOP with a $45,000 contribution.

Edmonton-based Ceapro Inc. committed$10,000 to BBOP.

A family-owned business with offices around theworld, the Wilbur-Ellis Company markets and distributes agriculture commodities. Through itsLethbridge office, Wilbur-Ellis Co. Canada contributed$2,000 to BBOP.

Parkland Agri Services operates from nine lo-cations in central Alberta, offering independent agri-cultural service and inputs to producers. Parkland AgriServices gave $1,000 to BBOP.

Acknowledging our partners


BBOP – Information you can useThe project is generating reliable and scientifically based

technical and business information on processing, operations,costs, revenues and market trends

The Barley Bioproducts Opportunities Project (BBOP) isdesigned to give barley producers information they canuse in today’s new and emerging valued-added markets.

“Our primary objective is to improve farm gate re-turns and to offer barley producers new and diversifiedbusiness opportunities,” says Mike Leslie, CEO of theAlberta Barley Commission. “BBOP has focused on fourmajor areas: technical feasibility; business feasibility;business plan and marketing considerations; and knowl-edge and technology transfer plan.”

This update is one of three that gives producers andregional producer organizations evidence-based infor-mation about investing and participating in renewablefuel or other bio-industrial projects. The project’s first up-date was distributed in the fall of 2007; the third update(on business feasibility) will be distributed later thisspring.

BBOP’s goal is to provide producers, investors andfunders with:

• Reliable scientific data on production processingand operations

• Reliable assumptions on costs, revenues and operating margins

• Reliable assumptions on end-use markets and market trends

• Operational management considerations includingfeedstock procurement, production and productmarketing.

Additional information, such as the full scientific re-port or the business feasibility/business plan report, isposted at www.wbga.org and www.albertabarley.com.

For more details, contact:

Carman Read, Project ManagerBarley Bioproducts Opportunities Projecte: [email protected]: 403.748.4425c: 403.318.0972m: 97 East Lake Ramp N.E.

Airdrie, Alberta T3A 0C3

The Barley Bioproducts Opportunities Project (BBOP) focused on evaluating barley’s potential in rapidly evolving bio-based industries to provide Alberta producers and their customers with the information they need to invest in bar-ley. BBOP is jointly managed by the Alberta Barley Commission and the Western Barley Producers Association.

BBOP managerCarman ReadC & N Partnerse: [email protected]: 403.748.4425 c: 403.318.0972

BBOP administratorDiane SavageWestern Barley Growers Associatione: [email protected]: 403.912.3998

BBOP monitoringDarcy KirtzingerAlberta Barley Commissione: [email protected]: 403.291.9111

BBOP communicationsTerry BullickBullick Writing & Communicationse: [email protected]: 403.246.5225

Western Barley Growers Association contactDoug McBaine: [email protected]: 403.637.3880 c: 403.816.0645

Alberta Barley Commission contactMike Lesliee: [email protected]: 403.291.9111 c: 403.826.7729

BBOP addressc/o 97 East Lake Ramp N.E.Airdrie, Alberta T3A 0C3

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