Roy Roberson 2

September 17, 2008

5 Min Read

Grain prices are good, and look to stay up for a while, but the main cause most widely attributed to these prices — biofuels — is just not happening in the Southeast.

Plans for a number of destination plants, which are designed to be built to bring in grain for the energy source, and for the final fuel product to be shipped to large, nearby markets, have fallen by the wayside. Though the energy business in the Southeast has taken a hit, grain production continues to grow strong.

Speaking at the recent North Carolina Feed Industry annual meeting in Myrtle Beach, S.C., Don Camden, a Southeast regional manager for Cargill, says little is going on with bioenergy plants in the Southeast.

An ethanol plant in southwest Georgia, near Camilla, is planned to come on line in 2009 and a barley-based ethanol plant in Hopewell, Va. is scheduled to begin construction this fall. Both plants have relatively small production capabilities and are projected to have limited impact on grain production in their areas of the Southeast.

Camden says one of the few positive examples of bioenergy production in the Southeast is a 30 million gallon per year biodiesel plant in Estill, S.C. Combined with a similar sized plant in Taylors, S.C., these two plants represent a high percentage of all the biodiesel produced from soybeans in the Southeast.

The Carolina Biofuels plant in Taylors, is the flagship operation for a new division of Carolina Polymers. The plant produced its first load of biodiesel fuel in the spring of 2006 and has since reached full design capacity of 30 million gallons per year.

A high percentage of the fuel produced at Carolina Biofuels is sold to the Spinx Company, a petroleum marketer that is committed to providing South Carolina's drivers with alternative fuels.

Carolina Biofuels supports South Carolina's grain industry by using locally grown soybeans to make its fuel. Subsequently, a second biodiesel facility in Estill, S.C., is set to begin production later this year. This will be an integrated operation that includes the existing Carolina Soya soybean processing facility, a newly constructed soybean oil refinery, and a new biodiesel production operation.

Proximity to ports in Charleston, S.C., and Savannah, Ga., was instrumental in location of the Estill, S.C., biodiesel plant. The plant in Taylors, S.C., is near the one of the largest ethanol and biodiesel distribution sites, near Spartanburg, S.C.

The success of small-scale biodiesel plants in other parts of the country likely contributes only minimally to supply and demand problems that keep bean prices high — some say artificially high.

A worldwide shortage of soybeans is a direct contributor to the price of beans and will clearly have a direct affect on how rapidly a biodiesel industry, using soybeans as stock, can get going in the Southeastern U.S. Right now, the economics are just not there, Camden contends.

The volatile nature of soybean prices, he adds, keeps everyone in the production and consumption chain guessing. Two years ago soybean prices averaged $6.72 a bushel and last years prices varied from $9 to $16 per bushel. That kind of variation is too much for everyone from growers on up to end-users.

“Nationwide, biodiesel production has grown from two million gallons in 2000 to 450 million gallons in 2007. In the U.S. we currently use about 62 billion gallons of diesel fuel per year. Projections for biodiesel production by 2012 is only one billion gallons, tops, so biodiesel is only a small drop in a big bucket,” according to Camden.

Though more efficient than corn for ethanol, soybeans at 1.5 gallons per bushel is still marginally economical, considering today's soybean prices. That's not likely to get better in the next few years as the soybean industry worldwide competes for acreage with corn, which stifles attempts to raise global soy stocks.

“If each of the 171 completed biodiesel plants in the Southeast ran at full capacity, we would use 26.9 billion pounds of raw material. The U.S. produces 24.6 billion gallons of vegetable oil and another 11 billion pounds of animal fats. At current full capacity, Southeastern plants would use over 70 percent of all the fats produced across the U.S. That is not realistic,” Camden says.

The bottom line, he says, is that we are building biodiesel plants much faster than we are raising the level of feed stocks to run these plants.

“To build a 20 million to 30 million gallon per year biodiesel plant today costs in the neighborhood of $50 million. Margins, with today's soybean prices, for biodiesel are about a dime a gallon. Without strong government support, the industry cannot support itself for long, Camden says.

The price of all grains affects the use of any grains for fuel. Wheat prices, for example, skyrocketed in 2007-2008. The livestock industry, which had hoped to substitute lower cost wheat for corn and soybeans were forced to go back off the use of wheat for feed due to high wheat prices.

Grain crop failures in South America and Australia have added to already low stocks of grains, including corn and soybeans. South America now produces more grain than the U.S., so shortages in those countries now makes a serious ripple affect on worldwide and U.S. grain prices.

The bottom line, Camden says, is that alternative energy from corn and soybeans is jeopardized nationally and new production is virtually non-existent in the Southeast.

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