When Fredrick Diesel invented the engine that bears his name, his concept was simple: Build a combustion engine that could be powered by crops grown in any region of the world. The concept is still good, the application hasn’t worked so well in the U.S.

NORTH CAROLINA grower Phillip McClain and his father grow canola for oil, not biodiesel.

Diesel’s concept is particularly ideal for farmers in the Southeast. Relatively warm weather prevents gelling problems with diesel fuel and growers in most of the region could grow crops nearly year round to provide stock for biodiesel plants.

The National Biodiesel Board reported in late 2009 that nearly two-thirds of biodiesel production capacity is no longer in operation. With increasing crude oil prices in early 2010, there is some hope a portion of this production capacity will resume production.

The global credit crisis, a glut of capacity, lower oil prices and delayed government rules on fuel mixes are threatening the viability of two of the three main biofuel sectors — biodiesel and next-generation fuels derived from feedstocks other than food. Ethanol, the largest biofuel sector, has likewise had its share of financial troubles.

Whether or not the current administration will continue to bolster alternative fuel production remains to be seen.

The renewable fuels standard mandates that a certain amount of cellulosic ethanol and biodiesel be sold in the U.S. each year. That includes at least 1.15 billion gallons of biodiesel in 2010, increasing to a total of 21 billion gallons by 2022.

The current reality of biodiesel production isn’t quite so optimistic. From 2004 until 2008, U.S. biodiesel production rose from less than two million gallons per year to nearly 45 million gallons per year.

In 2009, biodiesel production fell to approximately 32 million gallons and 2010 production appears to be headed to less than 30 million gallons.

A critical factor in biodiesel production is feedstock, which varies tremendously from region to region in the U.S. However, in most cases, feedstock makes up approximately 80 percent of the total cost of biodiesel production.

A group of North Carolina farmers and agri-business leaders found out first hand how a good business and market plan can quickly be torpedoed by rapidly escalating feedstock prices. A planned $40 million, 30 million gallon per year biodiesel operation in Mount Olive, N.C., had all the earmarks of success. The business plan was sound. High profile and highly successful farmers were among the mix of leaders bidding to bring the plant to production.

The business plan centered on continually lagging soybean prices and a continued increase in crude oil prices. Before construction could begin, financial problems all over the world forced investors to look for alternative sites to put money. The commodities market proved to be a good source for some. Soybean prices in particular skyrocketed and remain high relative to the early 2000s.

While most grain farmers have prospered over the past few years that prosperity did not compute well for biodiesel production. In the long-run, the Mount Olive facility never got clear enough of red ink to insure a profit for investors and never made it past the planning stage.

Henry Walker, a Davie County, N.C., farmer was one of the innovative farmers who helped get the project started. He says the market was there, but the profitability wasn’t. “When we pulled the plug on the project, it was the right thing to do he acknowledges. We partnered with West Central Soy in Ralston, Iowa to bring in biodiesel to sell so we could develop a market. That way if we had been able to have gotten the plant on line, our markets would have been established.

“The first train car load (25,000 gallons) took several weeks to sell. By the time we decided to not build the plant, over three years later, we were moving several loads a week. We had established a market in North Carolina,” he says.

Soybean oil has been the preferred source of feedstock for biodiesel production in the U.S., but farmers in the Southeast might well have a number of options that are more feasible for future production.

One answer may be pecans. Pecan nuts contain a high amount of oil consisting primarily of oleic acid, a fatty acid well-suited for biodiesel production. Getting pecan seedlings into full production takes at least a decade, and the cost of planting for biodiesel production isn’t feasible at the time.

However, a significant acreage of both wild and improved pecans is not harvested and marketed as food. In addition, a substantial portion of the harvested crop (10-20 percent) is culled and accumulates as waste at processing facilities. Many acres are not harvested each year when disease and insect damage reduces the quality of the crop below the rigorous standards of the food industry.

A similar case can be made for another traditional crop of the Southeast — peanuts. While edible peanuts and peanuts crushed for oil for human consumption may not be practical as a source for biodiesel, high oil-containing, non-edible peanuts grown as a separate crop could be one of the most efficient sources of renewable fuel available for Southeast farmers to grow.

Vehicles used by University of Georgia researchers and vehicles used at the Sunbelt Ag Expo have been powered by peanut biodiesel for the past few years. Cost aside, the engine cleaning capabilities alone have drawn rave reviews by those using peanut-powered vehicles.

Wilson Faircloth, a research agronomist at the USDA’s National Peanut Lab in Dawson, Ga. has tested a number of non-edible, high oil peanut varieties over the past years, and has recorded some astounding production numbers for peanut-biodiesel production.

Georganic, a high oil producing variety with little, if any value, as an edible peanut has been one of the top producing lines tested in Faircloth’s project. While soybeans routinely produce approximately 50 gallons per acre of usable biodiesel, Georganic peanuts have consistently topped 100 gallons per acre, frequently producing the 125-130 gallon per acre range.

It is often noted by peanut farmers and researchers that the first diesel engine introduced into the U.S. at a World Fair in the early 1900s was powered by peanuts.

Among alternative grain choices as feedstock for biodiesel, canola has some of the more esthetic and environmental advantages. North Carolina Farmer Phillip McClain says one particular field of canola on his farm has drawn photographers, even a wedding picture, from local residents.

Phillip and his father, Phil McClain, started growing canola as a source for biodiesel. The lack of demand for biodiesel and subsequent low prices pushed them into using their canola for high quality oil for the consumer market.

“We haven’t given up on growing canola for biodiesel, but right now it works out better for us to cut out the extra steps needed to produce biodiesel and use our canola for oil,” Phillip McClain notes.

Another potential source of biodiesel for Southeast farmers is chickens. More specifically, poultry fat offers a ready supply of relatively low cost feedstock for biodiesel production.

Southeast BioDiesel, an independently owned biodiesel production facility in North Charleston, S.C., began using poultry fat for biodiesel production back in 2006.

How big is the supply of poultry fat? Three of the top five poultry producing states are in the Southeastern U.S. (the top eight are in the South). Georgia, North Carolina and Alabama collectively produce between 35 and 40 percent of U.S. broilers annually.

If demand and profitability return for biodiesel, Southeast farmers are poised with a number of cropping options that can significantly and positively help build an energy industry in the Southeast.

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