Biodiesel profits slim as sales rise

Posted By on November 15, 2007

Biodiesel sampleAn analysis article written my Timothy Gardner and published in Reuters summarizes the challenges of running a biodiesel business. Although fuel prices have risen significantly and demand for alternative have tripled sales of biodiesel to 250 million gallons last year, the oil feed crops have risen as well. Soyoil, the primary oil feed crop in the U.S., have risen to a 33 year high this past year as plants continue to come online processing the oil into fuel. The spike in feedstock has pinched margins for processors and is taking a toll on profits.

According to the article, the amount of U.S. produced soyoil being used for biodiesel “should be 20% this year, which is up 6%'” The concern is that even with record crude oil prices that some biodiesel producers are still facing negative margins.

“We’ve produced capacity well beyond the ability of the market to absorb it today,” Lapp told the Soya and Oilfeed Summit 2007 this week.

And any increase in soybean production may not help much because demand for soyoil for food keeps growing as the global population rises, experts said.

Even record oil prices above $90 a barrel are unlikely to boost demand for soy biodiesel as a substitute for diesel made from crude, because the food industry will always outbid the energy industry for soyoil, Lapp said.

“The food industry is always going to be willing to do what it takes to produce that food,” he said.

To end on a positive note, the alternative and biodiesel industry is even more serious about looking into new feedstocks — ones that are not a food-based oilstock. About the only problem is that North American based oil crops are grown on traditional farms, ones that are currently growing soybeans or canola. Perhaps this new demand for ‘grown oil’ will simulated the Algae to Oil research and development?


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