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Have soybeans become too pricey for the burgeoning biodiesel industry?
It's painful to even think about. The corn and soybean farmers who have worked so hard over the years to build new markets for their crops — specifically ethanol and biodiesel — may now become victims of their own success.
I'm here in
In December the Energy Independence and Security Act specifically required a mandate for biomass-based diesel fuel. The usage requirement begins at 500 million gallons in 2009 and expands to 1 billion gallons by 2012. Beyond 2012, a minimum of 1 billion gallons must be used, and the amount can be set higher by the Administrator of the Environmental Protection Agency, in consultation with the Secretary of the USDA and the Secretary of the Department of Energy.
Talk about a built-in domestic market for your product!
But $12 soybeans don't make for great economics when you're trying to build an industry with cheap feedstocks. So at the outset, biodiesel leaders here are talking about other alternatives for producing biodiesel in the future.
Ed Hegland, Chairman of the National Biodiesel Board, told conference blogger Cindy Zimmerman that the industry's greatest concerns right now were feedstock prices. "These plants we've developed were not developed with the intent of having feedstock prices at the level they're at,bCrLf he says. "It's very damaging to have these prices at the level they're at. We're doing a number of things to address that, and some of them are long term things. Right now it looks pretty tough.bCrLf
You knew this would happen when corn hit $5 and beans $12 per bushel. We've done such an incredible job building markets for biofuels, now we can't afford to produce them at the prices the raw product sells for.
Hegland says the next challenge for the biodiesel industry is getting a tax credit continuation. The current onet is set to expire at the end of 2008 and the NBB hopes for a two-year extension. That would allow biodiesel to be more closely priced to petroleum diesel.
Corn and soybean producers got these ethanol and biodiesel markets started. But new feedstocks may need to be developed. Someday soybeans could be replaced by algae or some other plant material, says Hegland. There is also a lot of work being done to increase soy yields, and the expected increase of 6 million acres of beans this spring would also go a long way to make soybeans a more affordable feedstock for biodiesel.
It would be a darn shame if this new market that soybean farmers helped build launched without them. I'll let you know what else I learn about this topic tomorrow.
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