Thousands of Iowa's Corn Farmers See the Future in Fuel

Big manufacturers are also making engines that can run on biodiesel, a smaller but fast-growing segment of the industry.

At a gas station in Hiawatha, outside Cedar Rapids, an ethanol-infused gallon of 89 octane premium gas recently cost $2.69, 10 cents a gallon cheaper than the weaker 87 octane regular.

"Once ethanol got cheaper than gas, it really took off," said Bill Horan, a farmer who is putting together investor groups for new plants.

The response to investment groups has been stunning.

Two years ago, it took less than three weeks to raise about $20 million from 472 investors for the Goldfield plant in central Iowa. The average investment was $47,000, and two of every three dollars came from within 40 miles, said general manager Brad Davis.

Recently, the money has started arriving even faster.

When Horan and his partners sought $20 million for each of three new biodiesel plants, no request took longer than 10 days to fulfill. In one case, the offer was fully subscribed in eight days and the organizers sent $2.5 million back. Horan said banks have been willing to lend large sums with no collateral other than the refinery itself.

"People will drive all the way across Iowa to come to a meeting," said Horan, who grows soybeans and corn on 4,000 acres in Knierim, about 100 miles northwest of Des Moines, with his brother Joe. "It's the opposite of Big Oil. It's Little Oil. It's our oil."

The added demand has increased corn prices as much as 8 cents a bushel this year. A typical plant generates at least 30 jobs in rural Iowa, even as it creates uncertainty in long-established relationships among producers, cooperatives and buyers.

"Everybody in the corn industry is repositioning," said Joe Horan, on the board of the Goldfield plant. "Everybody's just kind of dancing right now, trying to find the right partner."

The way the Horans see it, the popularity -- and the political support -- for biofuel will increase as the number of people with a stake in it grows.

"Every time a plant is built," said Bill Horan, "that's 500 more ethanol supporters in a congressman's district. And they really care. It's not just Ma and Pa on the farm. It's their dentist son in Chicago who's interested in his inheritance, and his sister in San Francisco."