Biodiesel Myth #5 – Biodiesel makes food costs higher.

In a multi-part series about biodiesel, this is one of several articles in an attempt to dispel the myths about biodiesel and it’s use in commercial and private diesel engines.

Myth #5 – Biodiesel makes food costs higher.

This myth began with the increase in ethanol and biodiesel production in 2007.  It reached a fever pitch in 2008 with numerous articles claiming that corn and soy costs were skyrocketing because of ethanol and biodiesel production increases to meet consumer demand.

Soybeans and SME

The truth is that it was just the food industry capitalizing on speculation.  Want proof?  In 2010, biodiesel production in the USA is at 35% of it’s volume from 2009, but prices for soybean oil are at .50 per lb now ($3.75/gal), versus .35 per lb ($2.60/gal) this time last year.

Biodiesel?  Well, it’s at $3.80 per gallon now, versus $3.40 this time last year.

So, biodiesel production has decreased by over 65%, and prices only marginally increased (in spite of not having a federal tax credit), but soybean oil costs have gone through the roof.  What’s the real cause?  The same thing as last year, and the year before that.  Exports.  We’re exporting ridiculous amounts of virgin fats and WVO to Asia, Latin America, and Europe for things such as animal feed, and biodiesel feedstock.   With the dollar being depressed and petroleum less heavily subsidized in other countries, it makes sense to send cargo shiploads of vegetable oil to make biodiesel out of.

So, what should our government do to help biofuels? Restrict exports for feedstocks in the interest of national security?  Structured commodity markets?  In an environment where Ag companies are used to price supports and price fixing, it’d also be nice to see a fixed price per gallon for inedible soybean oil that is specifically used for biodiesel, and mandatory allotments that must be sold. (Think tobacco, and it doesn’t sound that harsh.)



Posted in Biodiesel.