Economics of Biodiesel and the Impact on Commodities

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Presentation transcript:

Economics of Biodiesel and the Impact on Commodities Allan Gray, Purdue University Center for Food and Agricultural Business

Some Basic Figures Biodiesel used as fuel extender and lubricant 73% of Biodiesel made from Soybean Oil 1 bushel of SB = 1.49 gallons of biodiesel 1 gallon of soyoil = 1 gallon of biodiesel Soyoil = $1.50 to $2.10/gal. 1 bushel of corn = 2.7 gallons of ethanol $2/bu. = $0.74/gal. - $3/bu. = $1.11/gal. Crude Oil Oil $70/brl. = $1.67/gal. - $50/brl. = $1.19/gal.

Some Basic Figures Subsidies Co-Products $1.00/gal. for Biodiesel = $1.50 per bushel $0.52/gal. for Corn = $1.40 per bushel Co-Products Biodiesel – Glycerine 0.89 lbs. per gallon worth about $0.18/lb. and declining

Annual Distillate Consumption

U.S. Biodiesel Production

Alternative Feedstocks

Projected U.S. Soybean Oil Demand and Production Largest Production Year on Record

Projected U.S. Soybean Demand and Production

Forecasted Soybean Acres and Production Source: FAPRI, University of Missouri

Projected Impact of Increased Biodiesel Demand on Soybeans Oil Price Soybean Meal Stocks

Potential New Feedstocks Soybean Oil -- 56 gallons per acre Canola Oil – 111 gallons per acre Castor Oil – 141 gallons per acre Others Crambe, flax, mustard, sunflower, camelina

Final Comments Biodiesel industry is relatively young Growth rate dictated by price of Oil/Diesel first and then soybean oil prices Important part of National Energy Policy but, Not Likely More than 10% of total distillate fuels in future