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Startup FEC?Solutions is broker for corn oil

Company is offshoot of biofuels industry

February 24, 2013
By LARRY KERSHNER, , Messenger News

DES MOINES - As the growth of the biofuels industry virtually exploded in Iowa, it has spawned the creation of additional entrepreneurial startups, including one in Des Moines - FEC Solutions.

A part of the Riley Resource Group, based in Des Moines, FEC was formed in 2006 as a broker of corn oil coming out of the ethanol industry.

According to Troy Shoen, marketing director for Riverhead Resources, serving the other subsidiary branches of the group, the role of FEC in the ag economy creates a larger demand for corn oil, extracted from distillers dried grains, the byproduct of the ethanol process. The result is added value to the oil that flows back to corn growers.

Article Photos

-Messenger photo by Larry Kershner
Krystal Hamick, an employee of Feed Energy, measures the content of free fatty acids from a batch of acidulated soybean oil. Knowing the content helps the company accurately blend the oil into poultry and swine feed.

Iowa's 22 ethanol plants produce upward of 33 million gallons of corn oil "and all of that oil needs a home," Shoen said.

FEC sources the oil, through open bidding and through some contracts, then markets this oil to primarily biodiesel plants, but also in exports and industrial uses, such as plastics and asphalt.

In a typical year, Shoen said, biodiesel plants cut back production during the fourth quarter because they have enough product on hand to meet the demands of the Renewable Fuels Standard. The price of corn oil will then slip from 40 cents per pound to 30 cents.

Fact Box

About Riley Resource Group

The companies that make up the Riley Resource group are Feed Energy Co., FEC Solutions, Riverhead Resources and Decision Innovation Solutions.

As chief executive officer, Robert G. Riley Jr. is a proponent for balanced and sustainable systems, including agriculture, environment, innovation, business and government. Advocating long-term perspectives, he works to create synergy and manage polarities within and between many entities, including his business interests, and various nonprofit, institutional and governmental agencies in which he is involved.

In 1986, Riley purchased Feed Energy and immediately began the process of building a feed ingredient company with products developed on innovation, research and sound science.

In 2006, he formed FEC Solutions to pursue opportunities within the biofuel industry.

In 2009, Riley started Riverhead Resources and became a strategic adviser and investor in Decision Innovation Solutions. Riverhead provides experts in proven business systems. DIS specializes in stochastic data analysis and dynamic risk-based modeling.

Riley has worked for more than 40 years in the fats and oils industry. He is asked to speak frequently about the essential capitals of sustainable systems - feed, food and fuel production, government policies and the role of innovation.

Riley is active in professional, state and community organizations including:

Leader, American Feed Industry Association.

Director, Iowa Poultry Association.

Director, Iowa Partnership for Economic Progress, of which he is chairman of the Iowa Innovation Corporation.

Trustee, The Nature Conservancy in Iowa.

Director, Community Foundation of Greater Des Moines.

Leader, Capital Crossroads Initiative, of which he is co-chairman of Natural Capital committee.

"There is no reason corn oil should ever be at 30 cents," Shoen said. "It's more valuable than that."

Besides serving as a corn oil broker, another company focus is to find additional industrial uses for the oil through refining.

"We think we've found the key to keeping the value in corn oil," Shoen said. "As one strips out more products, it makes the oil more valuable."

As FEC's research and development team looks for more outlets for the oil, Shoen thinks that eventually ethanol plants will see ethanol as its primary byproduct and corn oil as its primary income source.

"This is what's fun about the energy markets," Shoen said. "We're just on the cusp of what can happen.

"There's more room for growth and opportunity."

FEC, he said, is small enough and versatile enough to make the needed adjustments to take advantage of new opportunities as they arise.

A little history

In 1986, FEC's chairman, Bob Riley, purchased Feed Energy in Des Moines.

Feed Energy, not to be confused with FEC Solutions, removes solids from vegetable oil stocks through an acidulation process and then markets the refined oil as a livestock feed additive. Most of the oil is mixed with poultry feed, but some also goes into swine feed, Shoen said. Feed Energy provides this diet additive for the bulk of Iowa's poultry feed industry.

He said the additive is a way for livestock growers to get the required amount of kilocalories into animal diets, without adding carbohydrates or protein.

"It's like Gatorade for us," Shoen said.

Feed Energy's target audience is animal nutritionists, he said. Business managers are a secondary target for its products.

"A tertiary audience is feed mills," Shoen said. "We also get feedback from producers."

This includes carry-out numbers of daily rates of gain and market weights.

Since Feed Energy's products are derived from soybean oil, it has vitamins A and D and antibodies for overall animal health.

Both Feed Energy and FEC are members of the Safe Food/Safe Feed Program through the American Feed Association.

"We are always cognizant that what we feed the animals feeds us," Shoen said. "It all makes its way into us ultimately."

Forming FEC Solutions

In the mid-1990s, the biofuels industry kicked into high gear and ethanol plants appeared on the Iowa landscape like popping corn. According to Shoen, Chairman Riley saw that distiller's dried grain would compete with Feed Energy's products as a livestock feed additive.

So he formed FEC Solutions to create a marketing channel for the increase of corn oil that would hit the open market. FEC brokers that oil into other outlets, such as biodiesel, plastics and asphalt, without competing with Feed Energy's markets.



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