Biodiesel Heating Up

After a rough couple of years that saw plants idled and workers laid off, the biodiesel industry appears ready for a comeback. Although attendance was down at the recent National Biodiesel conference in Tampa, reflecting the pain of the last two years, the mood of those in attendance was cautiously optimistic. This was mainly due to the approval of the biodiesel tax credit last December as part of a tax extenders package. The 5 year credit (two years past and 3 forward) finally gives the industry some stability for future growth. It will take a while to recover from the recent setbacks but plans are already being made to push this industry to new levels. This could mean new market opportunities for soybean growers who years ago helped create biodiesel as a means of addressing a burdensome supply of soybean oil. If the industry’s plans for the future are realized, soybean farmers will soon be asked to increase their supply of soy oil. The National Biodiesel Board’s goal is to increase biodiesel usage from its current 3 billion gallon level up to 6 billion by the year 2030. One of the keys to that increase will be available feedstocks, primarily soybean oil. The industry currently uses about 8 billion pounds of soybean oil but will need about 18 billion to achieve its goal. That will require a commitment from soybean growers and probably the need of more crushing capacity. The industry is counting on two key sectors to spur this growth. One is the growing demand for low carbon fuel on the west coast and the other is the home heating market in the northeast. Both are already increasing demand and are expected to continue to grow in the coming years. However a big hurdle remains. The EPA continues to set biodiesel levels in the RFS at a lower level than the industry has shown it can produce thus not helping grow demand. To make things worse EPA continues to hand out small refinery exemptions which make an already too low number even less. As harmful as these waivers have been to the ethanol industry they have arguably hurt the biodiesel industry even more. Still there is renewed hope in the biodiesel industry. Perhaps the stars are finally aligned to allow an industry still in its infancy to fully mature.