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Iowa Corn Cluster of Firm Location Decision Based on Cheap Corn

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Title: Iowa Corn Cluster of Firm Location Decision Based on Cheap Corn


1
Iowa Corn Cluster of Firm Location Decision Based
on Cheap Corn
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Is an industrial cluster being formed in Iowa
based on corn?
  • Ethanol
  • 15 ethanol plants in operation (4 wet mill)
  • 12 plants under construction
  • More plants in surrounding states
  • Learning by doing has
  • increased efficiency from less than 2.5 gallons
    per bushel of corn to 3.0 gallons per bushel
  • Increased value of byproduct (protein meal) that
    should lead to relocation of livestock facilities

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Is an industrial cluster being formed in Iowa
based on corn?
  • Biorefineries
  • Starch for food and industry
  • Protein for animal feed
  • Oil for food
  • Ability to crack corn growing as demand for
    alternatives to petroleum-based products grows.
  • Subsidy-driven increases in HFCS and ethanol have
    created a knowledge base that can be exploited
    for profitable new consumer products
  • (at least a partial payback from distortionary
    subsidies?)

7
Seed Company Impact
  • Seed companies centered in the Corn Belt.
  • RD labs close to experimental plots
  • High quality seed producers
  • Segmentation and handling expertise
  • Complementary breeding and genetic programs at
    Iowa State University
  • First large-scale applications of bio-tech by
    Monsanto and Pioneer naturally has occurred

8
Investments in Biotech
  • Coordinated effort by State of Iowa, ISU and
    University of Iowa to invest in biotech science
    and application to processing corn and soybeans,
  • Strategic plan of Iowa written by Batelle.
  • Build on biotech strengths of ISU, U of I, cheap
    corn, seed companies, and current state of
    knowledge about how to process corn to become the
    biorefinery center of the universe.

9
Demand Growth from Focus on Biorenewables
  • Petroleum-based products impose externalities in
    terms of global warming in the production process
    and waste disposal in the elimination process
  • Technology exists to replace most products with
    products made from parts of corn and soybean
  • Polylactic acid from corn starch is made into
    plastics
  • Technology developed by Cargill and produced in a
    joint venture by Dow and Cargill
  • Will degrade into compost in two months
  • Uses about ½ the energy input as glass or
    conventional plastic
  • Can be used to substitute for nylon, packing
    material, paper, coton, cellophane,
    polypropylene, (fishing line)

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Biotech Plastic Production
  • Dupont will soon market a plant-produced polymer

11
Questions
  • From this emerging cluster, will rural income
    growth increase?
  • Is there a need for more than one corn/soy based
    cluster?
  • Seems likely that demand for biorenewables will
    not shrink. Is there a need for public support
    for the effort?

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Minimum Certification Requirementsfor Iowa 80
Beef
  • The cattle must be produced from a Black Angus or
    Red Angus bull.
  • Individual animals must be source verified to the
    farm of birth using an electronic animal
    identification system.
  • The cattle must be fed in Iowa for a minimum of
    200 days on a high-concentrate ration of at least
    75 percent corn or corn co-products.

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What Attributes Might Create Value?
  • Individual animals must be age verified and
    processed by 18 months of age.
  • Each carcass must grade Choice Plus or better
    according to official USDA Grades.
  • A second quality level must grade Middle Choice
    or higher.
  • Product will be aged at least 14 days prior to
    being sold.
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