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Crush Time in Southeast Colorado

Monday, November 15, 2004
filed under: Utilization/Trade

Southeastern Colorado has never been considered the epicenter of U.S.

sunflower production or processing; but the folks at Colorado Mills are

striving to move it a little closer.

Based at Lamar, Colorado Mills LLC produces expeller-extracted sunflower

oil for customers serving the natural or organic foods markets. The company

simultaneously sells the resulting sun meal -- in pellet, range cube or bulk

form -- to High Plains cattle feeders.

Established in 1999 by a group of local farmers and businessmen, Colorado Mills processes its sunflower in a renovated former grain loading facility near downtown Lamar. The plant can presently crush about 9,000 gallons of sunflower oil per day -- more than double its capacity prior to a

major redesign in 2002/03. Though sunflower -- NuSun, specifically -- is the

predominant oil, the mill has also crushed canola and corn germ and is likewise exploring additional options (such as contract crushing for a biodiesel supplier).

Rick Robbins, who joined Colorado Mills as plant manager in early 2002 and has been general manager since June of 2004, says the Lamar company produces crude sunflower oil, not refined. After expeller extraction and a preliminary filtering process, the crude oil is stored until shipment to customers. Each customer then does whatever further processing is desired

to fit its respective end-user market(s).

Colorado Mills sells its sunflower oil nationally, with about 90% shipped out by rail. The company has also sold some oil through brokers to export markets in Mexico and the Far East.

The bulk of U.S. sunflower oil is produced by Cargill and ADM (Northern Sun) via a combined screw press/solvent extraction process, wherein the majority of oil is squeezed (expelled) from the seed by a mechanical press, with nearly all remaining oil in the meal then retrieved by solvent

extraction. Since the Colorado Mills plant does not use solvent extraction, all of its oil is extracted via mechanical expelling. It¹s a two-step process: the first removes about 60% of what they¹re able to extract; the second step the other 40%.

Before expelling, the seeds are preconditioned in a cooker vessel, where

steam heat expands the seed, cracks the hull and initiates 'mobility' of oil

within the seed. Robbins says there are just a handful of plants nationwide

that produce strictly expeller-extracted sunflower oil, "and we're probably

one of the largest."

One well-known end user of Colorado Mills-produced sun oil is Frito-Lay, which purchases a further-processed product from a

Colorado Mills customer for use in the Frito-Lay "Natural" snack food line.

Because Colorado Mills does not employ solvent extraction, the percentage of residual oil left behind in its sunflower meal is significantly higher: anywhere from 6 to 12%, compared to just 0.5 to 1.5%

in solvent-extraction plants. While that¹s an obvious disadvantage on the oil marketing side, Robbins says it's a plus in the meal arena. The reason? Higher fat content and more energy value. Unhulled mechanically extracted meal will contain upwards of 9% fat, while unhulled solvent-extracted meal is typically closer to 1.5%. (Crude protein will be similar: around 28%,compared to 34-35% on totally decorticated seed.)

"Where we have an advantage is in the cow-calf market," Robbins suggests. "Ranchers readily see the energy value in our range cubes. It seems the extra energy in our sun meal does tremendously well with these

animals." He says the extra oil also contributes to increased palatability

of the sun meal.

While commercial feedlots buy a large portion of Colorado Mills' sunflower meal (usually in 500- or 1,000-ton lots), the benefits of the higher fat content are tougher to gauge in these large lots, says Robbins, who was a livestock and feed sales specialist prior to joining the company.

"You're looking at 120 days and thousands of animals" in large feedlots, he

points out. "It's hard to quantify our product's performance advantage over something else when they¹re factoring in weather, genetics and other variables."

Colorado Mills markets its meal to ranches and feedlots within a 200-mile radius of Lamar, with the range cubes selling as far away as Wyoming. The meal "makes a very durable pellet by itself, with no additives

or binders -- even with that higher fat content," Robbins states. "You'd think it would be 'greasy,' but it's not. There's a significant difference between adding fat externally and the fat that's already contained [in the meal]."

One of the biggest challenges in marketing the plant's sunflower meal, Robbins remarks, is competing with ethanol plants in the region. "They'll take dried distillers' grains and pretty much dump them on the market to get rid of them," he states. "That really impacts our protein market. We're trying to function as a normal business without any government

subsidization, and we get undercut by $20 a ton. That's hard -- and you never know when it¹s going to come up and bite you."

Another challenge is one faced by any oilseed crusher: the balancing of oil and meal supply/demand on a year-round basis. As of mid-September 2004, for example, Colorado Mills was producing as much oil as possible to meet customer demand. But the winter meal market was still months away, and higher cattle prices meant feedlots weren't very full. The result was a

glut of protein byproducts (corn gluten feed, soy meal, sun meal), thereby

pressuring prices. Meanwhile, Colorado Mills was rapidly building up more

meal volume than desired due to its oil production pace and was forced to

store some of the meal off-site.

"But last year it was the other way around," Robbins says. "We were crushing faster than we wanted to because we needed the meal."

Colorado Mills purchases sunflower seed from growers throughout the High Plains, competing for product with several birdseed companies and the region's major sunflower crusher, ADM/Northern Sun at Goodland, Kan. The Lamar-based company offers sunflower production contracts with terms similar

to those of other 'flower processors: 10% moisture basis, two-for-one premium on oil content above 40%, and discount scales for high foreign material.

They also offer growers the option of contracting (1) a set

volume of hundredweight of seed, or (2) total production off a stated number

of acres. Contract maximums are 1,400 pounds per acre on dryland 'flowers

and 2,400 pounds on irrigated.

Marketing manager Kevin Swanson, who has been with Colorado Mills since the company opened its doors in 1999, says much of his time the first few years was spent familiarizing area farmers with the fledgling firm and establishing grower confidence, i.e., "making them feel comfortable that we're going to be here for another season . . . that they¹re safe bringing their product here."

A sizeable portion of the company¹s current grower base has developed via favorable word of mouth, he adds. "If you do a good

job the first year, they'll come back," Swanson affirms. Colorado Mills now

pulls in sunflower seed from southeastern Colorado, western Kansas, Oklahoma

and the Texas Panhandle.

"It hasn¹t been easy," Swanson concedes. "But we've kept our doors

open and continued to grow in our business."

Rick Robbins says the reputation and guidance of the company's investor-owners has been another key factor in its success to date. "The owners have done a good job of supporting the company," he states. "They're good producers, good businessmen. That helps attract [growers and customers] who want to do business with us." -- Don Lilleboe

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