Released May 11, 2022 | SUGAR LAND
en
Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--"Buy land--they ain't making any more of it." That investment advice, attributed to both Mark Twain and Will Rogers, also identifies a key component in the biofuels availability discussion. To be sure, not all biofuels come from crops. Some comes from animal fats, discarded restaurant cooking oil and agricultural waste, but those sources are pretty fixed. As U.S. refiners increasingly add to their capacity for producing biodiesel or renewable diesel, the main option for increasing feedstock is to plant more soybeans or corn.
That option quickly runs plant-based diesel--and, truly, ethanol and all crop-based renewables--headlong into competition with corn flakes and tofu. The U.S. Energy Information Administration (EIA) predicts significant growth in the production of renewable diesel over the next decades. They see renewable diesel production reaching around 130,000 barrels per day (BBL/d) by 2030, up from around 90,000 BBL/d in 2020. Biodiesel, the less costly but also less interchangeable option, is expected to drop from its 110,000-BBL/d 2020 levels, but begin rising again by 2040.
To feed that much production growth, industry experts have estimated soybean production would have to grow by about 3.6 billion bushels by 2030. With plant-based diesel demand expected to continue to grow past that, production--and land use--would have to continue to expand as well. Price inflation would be inevitable, not only for fuel but for food as well.
Banking and financial services company Rabobank (Utrecht, Netherlands) has estimated that an additional 12 million acres of soy would have to be planted to accommodate expected demand growth--an amount that is not going to be available.
As with most issues, it's not nearly that simple because soybeans are traded internationally, and the U.S. is involved both as an importer and exporter. The U.S. Department of Agriculture (USDA) reports that 2020 was a record year for U.S. soybean exports. That year, exports "reached a record $25.7 billion, up nearly 40% ($7 billion) by value and up 23% (11.9 million tons) by volume from the prior year. Exports to China jumped $6.2 billion (up 77%) from last year, significantly contributing to the rise in total exports. The total value of U.S. soybean exports was more than $4 billion (18%) above the 5-year average of 2013-2017."
U.S. production was still rising as of the end of last year, when the USDA noted, "U.S. processors crushed a record 197 million bushels of soybeans in October, nearly 0.5 million bushels higher than the record established in October 2020. This translates to an impressive 6.35 million bushels of soybeans crushed per day."
But not all of that stayed home. In 2021 the U.S. sent 32.3 million metric tons of soybeans to China, up 25% from the previous year. On the other hand, the U.S. imported 58.15 million metric tons, which was down 9.5% from 2020.
So reducing exports while boosting imports to feed bio and renewable diesel refineries would seem to be the solution--but again, it's not that simple. It's all about price and the value of clean fuel incentives, say the experts, a complex equation that will be the topic of a future article of its own.
Prices Rise While Refineries Close
The November 2021 closure of Renewable Energy Group's (NASDAQ:REGI) (Ames, Iowa) biodiesel refinery in Houston, Texas, due to feedstock issues was the latest in a series that began in 2019. Rising feedstock costs along with a drop in D4 renewable identification numbers (RINs) played into the decision. D4 RINs are renewable energy credits from the EIA's renewable fuel standard.
To stay in business, a refiner, like the rest of the economy, must be reasonably assured of making a profit, whether by selling a finished product for more than the sum of the cost of its feedstock and manufacturing cost, or by mitigating those costs through government incentives. When both are in flux, the market becomes unstable and participants flee.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
That option quickly runs plant-based diesel--and, truly, ethanol and all crop-based renewables--headlong into competition with corn flakes and tofu. The U.S. Energy Information Administration (EIA) predicts significant growth in the production of renewable diesel over the next decades. They see renewable diesel production reaching around 130,000 barrels per day (BBL/d) by 2030, up from around 90,000 BBL/d in 2020. Biodiesel, the less costly but also less interchangeable option, is expected to drop from its 110,000-BBL/d 2020 levels, but begin rising again by 2040.
To feed that much production growth, industry experts have estimated soybean production would have to grow by about 3.6 billion bushels by 2030. With plant-based diesel demand expected to continue to grow past that, production--and land use--would have to continue to expand as well. Price inflation would be inevitable, not only for fuel but for food as well.
Banking and financial services company Rabobank (Utrecht, Netherlands) has estimated that an additional 12 million acres of soy would have to be planted to accommodate expected demand growth--an amount that is not going to be available.
As with most issues, it's not nearly that simple because soybeans are traded internationally, and the U.S. is involved both as an importer and exporter. The U.S. Department of Agriculture (USDA) reports that 2020 was a record year for U.S. soybean exports. That year, exports "reached a record $25.7 billion, up nearly 40% ($7 billion) by value and up 23% (11.9 million tons) by volume from the prior year. Exports to China jumped $6.2 billion (up 77%) from last year, significantly contributing to the rise in total exports. The total value of U.S. soybean exports was more than $4 billion (18%) above the 5-year average of 2013-2017."
U.S. production was still rising as of the end of last year, when the USDA noted, "U.S. processors crushed a record 197 million bushels of soybeans in October, nearly 0.5 million bushels higher than the record established in October 2020. This translates to an impressive 6.35 million bushels of soybeans crushed per day."
But not all of that stayed home. In 2021 the U.S. sent 32.3 million metric tons of soybeans to China, up 25% from the previous year. On the other hand, the U.S. imported 58.15 million metric tons, which was down 9.5% from 2020.
So reducing exports while boosting imports to feed bio and renewable diesel refineries would seem to be the solution--but again, it's not that simple. It's all about price and the value of clean fuel incentives, say the experts, a complex equation that will be the topic of a future article of its own.
Prices Rise While Refineries Close
The November 2021 closure of Renewable Energy Group's (NASDAQ:REGI) (Ames, Iowa) biodiesel refinery in Houston, Texas, due to feedstock issues was the latest in a series that began in 2019. Rising feedstock costs along with a drop in D4 renewable identification numbers (RINs) played into the decision. D4 RINs are renewable energy credits from the EIA's renewable fuel standard.
To stay in business, a refiner, like the rest of the economy, must be reasonably assured of making a profit, whether by selling a finished product for more than the sum of the cost of its feedstock and manufacturing cost, or by mitigating those costs through government incentives. When both are in flux, the market becomes unstable and participants flee.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
