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Corn+Soybean Digest

Biodiesel Dilemma

With the fervor to use renewable fuels, companies and individuals are fast building biodiesel plants in hopes of capturing the market. In fact, that's never been truer than since President Bush's recent challenge to replace 75% of oil imports from the Middle East by 2025.

“By 2025, we'll make foreign sources of oil go the way of typewriters and Walkmans,” says Stephen Johnson, administrator of the Environmental Protection Agency. “Our country is on the verge of a dramatic change for how we power our cars, our homes and our businesses.”

Fueling biodiesel's growth is the president's budget call for $100 million to support energy policy that includes markets for biodiesel, ethanol and other renewable fuels.

Less dependence on foreign oil is the goal. “In the past 25 years, the cumulative cost of importing crude oil has cost the U.S. $1.4 trillion,” says Johnson, who adds that now is the time for more homegrown fuels.

Surprisingly, biodiesel's current production capacity already exceeds the current demand, says Leland Tong, MARC-IV Consulting from Williston, ND. Still, he adds, the renewable fuel is expanding at a breakneck pace. (See accompanying charts and tables.)

“And as the industry builds, it's trending toward larger facilities where some of this new capacity will begin to replace some of the existing plants,” says Tong. “Not all companies will survive.”

Besides the rapid expansion, experts also question where future feedstocks will come from to quench the thirst for biodiesel. Currently, about 3 billion gallons of oil comes from U.S. crops; about 1 billion gallons from animals fats.

In the European Union (EU), where biodiesel use is far ahead of that in the U.S., plants are also being built at a rapid pace to meet the B2 (2% biodiesel) directive by 2010. Eighty percent of the EU uses biodiesel. Germany is the No. 1 user, followed by France and Italy.

“We have enough capacity now for all our domestic use in Germany,” says Detlef Evers, who is responsible for ADM's biodiesel sales and marketing in Germany and Europe. “We're building a huge biodiesel over capacity. By 2007, Germany will have a 6.6 million ton capacity and will then become an exporter.”

Other EU countries are gearing up for biodiesel production, too. For example, Spain announced it has 40 new biodiesel projects under construction.

So will the U.S. become a biodiesel importer? “I just don't think so,” says James Duffield from USDA's Office of Energy Policy and New Uses. “It's unlikely the U.S. would import a significant amount of oilseed crops or biodiesel.”

But Duffield says the U.S. needs to be able to provide enough feedstock to meet future demands. Currently, he says there's not enough feedstock to replace petroleum.

Joe Jobe, executive director of the National Biodiesel Board agrees. “We need to think about feedstock development 10-20 years down the road,” he says. “How will we grow more raw materials?”

To help meet future demand, Duffield points out scenarios on ways to grow more feedstocks.

  1. U.S. farmers will begin growing more soybeans and less wheat.

  2. More farmland will need to be brought into production. “That's doubtful,” he says, “since most of the prime land is already being used.”

  3. Increase bushels per acre of oilseed crops, mainly soybeans.

  4. Increase oil content per bushel of soybeans.

  5. Introduce new plant varieties.

Although overcapacity and producing enough feedstock could be an issue in the future, it may be too soon to draw that conclusion right now.

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