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Wednesday, August 08, 2007

On biodiesel

From this week's Crop News Weekly:
One of the biggest short-term threats to the profitability of the U.S. biodiesel industry is the rising price of soybeans, which forces the industry to turn to feedstocks other than soybeans or shut down or slow down operations, according to Kenneth "Pete" Moss of FBA Consulting, Memphis, speaking at the AgTechnology Field Day at Agricenter International, Memphis.

"I believe the biodiesel industry is somewhat a victim of its own success. We've grown rapidly, and with all the construction activity and plants coming on line, we're seeing a lot of speculation in the soybean market right now. Soybean oil should be in the 25-cent per pound range."

Instead, with soybean futures at around $8.50 a bushel, Chicago Board of Trade soybean oil futures had climbed to almost 40 cents a pound by July 18, noted Moss. "It takes 7.5 pounds of soybean oil to make a gallon of biodiesel. Forty cents a pound times 7.5 equals $3 per gallon invested in the oil itself. That's before you do any processing. That's a pretty expensive starting point to make biodiesel.

"Once soybean oil prices get too high, biodiesel plants have to either shut down, slow down or use animal fat or some other type of oil."
The last two paragraphs are telling. My prediction: look for more subsidies from the Federal government.

Full story here

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