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Shifting spotlight

University of Illinois ag economists Scott Irwin and Darrel Good have an interesting observation. The market focus may soon shift to biodiesel, they recently wrote in a column provocatively titled, “The Biofuels era—A Changing of the Guard?”
By Susanne Retka Schill | November 05, 2012

University of Illinois ag economists Scott Irwin and Darrel Good have an interesting observation. The market focus may soon shift to biodiesel, they recently wrote in a column provocatively titled, “The Biofuels era—A Changing of the Guard?” Ethanol demand for corn is essentially maxed out, having hit the blend wall and with tepid demand growth on higher blends.

“While ethanol has garnered nearly all of the headlines in recent years, its role as the leading driver of crop prices may be nearing an end,” the authors say. Good and Irwin peg the blend wall at 13.3 billion gallons and take a look at where Brazilian ethanol import levels are likely to stabilize. The RFS continues to call for more advanced biofuels, they point out, which they reason, is not likely to come from cellulosic ethanol.

“One might be tempted to conclude that this new era is coming to an end as corn consumption for ethanol levels out and corn production begins to catch up. Instead, it actually appears that the new era of higher crop prices could be extended well into the future as a result of the RFS for advanced biofuels that in all likelihood can only be met with a rapid expansion in biodiesel production.

“To gain some perspective on the potential size of this expansion, consider our projection of 3.113 billion gallons of biodiesel production in 2015. This would require about 23.5 billion pounds of feedstock when total consumption of fats and oils in the U.S. currently totals about 28 billion pounds annually. Consumption of tallow and grease, another biodiesel feedstock, is thought to be near 10 billion pounds per year. At the projected level for 2015, biodiesel would account for over 60 percent of fats and oils consumption from all sources. This compares to about 20 percent in in 2012. The new price era, then, would not be extended by rising corn demand, but by rising vegetable oil demand. Whether this scenario actually is realized depends crucially on the evolution of biofuels policy here in the U.S. and energy policies in Brazil.”

It would be a fascinating shift in market dynamics and perhaps give a needed boost to some intriguing alternative oil crops, though the dominant feedstock, soybeans, would get most of the boost. Some of my best read stories from when I wrote for Biodiesel Magazine were the articles looking at new oil crops. One of those is pennycress, AKA frenchweed and several other names. It’s a weed being evaluated and developed as an oil crop. When I wrote about the early work in crop development a few years ago, the researchers were saying it looked as though it could work in a corn/soybean rotation, providing a winter cover crop and being harvested early enough in the summer for a late soybean crop. Yields, even with the first wild strains under trial, were decent. There can be a big difference, of course, between promising research plot trials and what happens when farmers try it at field scale. There is also the long dance between the two sides of the equation, supply and demand. You know, the chicken and the egg syndrome: who’s going to grow the crop when there isn’t a guaranteed demand and who’s going to invest in a production facility if there isn’t a sure supply.

Indeed, that is what the RFS has been about – using federal policy to push the dance partners together, in this case the blenders and the producers of renewable fuels. It’s an intriguing thought that corn ethanol is last year’s hot dance, cellulosic ethanol is still waiting in the corner of the school gym wistfully watching the dance floor, while biodiesel will soon be in middle of the spotlight.