Ready Markets Soak Up Corn Oil

As production of corn oil has increased at ethanol plants, utilization by biodiesel plants, the animal feed industry and the export market have kept pace. Looking specifically at biodiesel, between 2011 and 2013, use of corn oil as a biodiesel feedstock grew by a whopping 245 percent, according to U.S. Energy Information Administration numbers.

“There’s significant demand today for corn oil, and that’s reflected in the pricing,” says Joseph Riley, general manager of FEC Solutions, which began buying corn oil in 2005 or 2006. “There’s a premium for corn oil today, and I think that’s going to continue to be a driver in the market. I think, relatively speaking, it’s a short-term opportunity for the feed market, and biodiesel will continue to price it out of the feed market.”

Prior to 2000, the corn oil market was relatively small. It grew rapidly in 2008, however. That was the year that Renewable Products Marketing Group and other companies began marketing ethanol coproducts. Currently, RPMG markets corn oil for 12 plants that produce more than 170 million pounds of corn oil annually.

Main Markets
Corn oil’s role as a popular feedstock choice in the biodiesel arena is quite apparent and growing, which made 2013 a great year for corn oil-derived biodiesel. More than 1.04 billion pounds of corn oil were utilized for biodiesel production by the end of 2013, an EIA biodiesel production report showed, making it the second most popular feedstock choice. During the second half of 2013, corn oil finally broke the 100 million pound mark not once, but on three separate occasions.

Corn oil producers have options to sell within local markets, as well as destination markets, says Riley. Locally, the oil can be transported via truck to nearby biodiesel plants or feed producers. In the case of Marquis Energy, the company is located relatively close to one of Renewable Energy Group’s biodiesel plants, says Tom Marquis, director of marketing at Marquis Energy LLC, which installed corn oil separation units in 2008. REG is one of the leading North American biodiesel producers with a 257 MMgy capacity and has been using the feedstock since 2007. “Our freight to their facility is pretty reasonable, so that has been the best market for our plant,” Marquis added.

In order to send the oil to other markets within the United States or to export it to foreign markets, producers not located on a rail line would need to utilize a transloading station to transfer the oil from a truck to a railcar. Once the oil is in the railcar, it can be transported greater distances to biodiesel plants and exporting facilities in other states, such as Louisiana and California, he adds. “The Californian biodiesel market is favoring corn oil from a carbon-related standpoint.”

“These renewable diesel plants in Louisiana are big plants and some of their feedstock is corn oil,” Marquis explains. The Diamond Green Diesel facility, a joint venture between Valero Energy Corporation and Darling International Inc., uses corn oil with other feedstocks to produce 137 MMgy of renewable diesel, he added. “So those are big, multifeedstock plants, but even if a portion of it is corn oil, that’s still a lot of demand for corn oil.”

Some foreign markets are also beginning to use the extracted corn oil for biofuel production. For instance, Neste Oil, uses the corn oil to help produce its NExBTL renewable diesel fuel. The company added corn oil as one of its biofuel feedstocks in July and produced more than 1.2 million metric tons of renewable fuel using distillers corn oil, along with other waste and residual materials.

Although biodiesel production seems to be the hottest market for corn oil, its use as a feed additive cannot be easily dismissed.  “Right now, our biggest customer is the biodiesel market. They are a very large user of distillers corn oil,” says Matt Niemeyer, corn oil merchandising manager at Renewable Products Marketing Group LLC. “Feed is a close second.”

Poultry feed applications seem to be the most popular sector of the feed market, but other groups are beginning to emerge, such as swine feedlots looking for another fat source Niemeyer says. “Perdue Farms Inc. has been a pretty big buyer of corn oil into poultry feed, I believe,” Marquis recalls, “We’ve shipped some railcars to another poultry operation.”

“The good thing about it is that it is a vegetable-based source of energy versus an animal fat or animal-based product,” Niemeyer says. Spreading that data through word-of-mouth and research to potential consumers is one way corn oil’s popularity has been growing, he adds.

With corn oil meeting the growing needs of the biodiesel and feed industry, producers may need to examine ways to improve the handling and transportation of the material, especially during colder winter months. There may be some improvements in how the industry handles corn oil to maintain its quality in order to become a better export possibility, Marquis says. “There’d be more potential for export if there were ways to maintain quality.”

Novel Uses
Although the potential for corn oil exists in other markets, it is not yet widely being taken advantage of.  Some are thinking of the edible corn oil market, however, advancing into that market would require greater regulation, processing and, of course, capital spending. “There’s a lot of cleanup, refining and deodorizing that would need to occur,” Riley explains. “It would have to be an identical product to a shelf-stable Mazola oil, so there would be significant processing and loss to be able to achieve that standard. The FDA and USDA would also have to give their approval.”

While breaking into the food-grade market seems quite intimidating, there may be additional opportunities in other industrial chemical markets. One possibility is pesticide and fungicide applications for organic farming and greenhouse applications. California-based, JH Biotech manufactures and researches biotechnologies for safer farming applications. It produces the GC-3 organic fungicide and GC-Mite organic insecticide using corn oil.

Unlike petroleum-based pesticides and fungicides, the corn oil pesticides provide the user a much safer application. With the petroleum pesticides, the user usually needs to be properly trained and licensed by the state and wear multiple items of protective clothing, says Donald Lester, product manager at JH Biotech. “As a manufacturer, you have to go through a lot more testing and approval processes from the EPA to get them on the market.”

Regarding extra processing, corn oil does not have to be a certain grade before being used in pesticide or fungicide production, Lester says.  “All pesticides have to be approved by the EPA and they have a list of what they call generally recognized as safe ingredients that you can put into pesticides. If you use everything on that list, it makes it really easy for a manufacturer to get the product registered, and corn oil is on the list.”

Corn oil, which can be combined with other ingredients, will kill soft-bodied insects by plugging up breathing tubes on their body, Lester says. The oil can also combat powdery mildew disease that can affect numerous types of crops, such as squash, cucumbers and melons. “It puts an oily coating on the leaf, then the fungus doesn’t get the chemical signals it needs to find its way into the plant,” Lester explains. “It’s pretty simple, but it’s pretty effective.”

Some of the biggest customers in this arena are commercial-scale, organic farmers and people who tend small, organic gardens. Medicinal marijuana farmers also prefer using the pesticide due to its safety, Lester says. “They grow indoors so the humidity is very bad; they don’t ventilate a lot so you got the powdery mildew fungus growing in there, and they usually get insect problems, usually with aphids. “They don’t want to spray indoors with a bunch of toxic stuff, so they always use the organics.”
Currently, California is the biggest, organic producing and consuming state, Lester says. “These corn oil-based products will be used on pretty much any organic crop. Everything from all the high-end berry crops to vegetables.”

Author: Chris Hanson
Staff Writer, Ethanol Producer Magazine
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