Biofuel updates, insights

By Matt Reese

A lot has changed in 25 years.

Some of the biggest changes in my time with Ohio’s Country Journal involved the biofuels industry. Since the rise of ethanol, largely enabled by efforts from Ohio corn growers, biofuels have gone from a promising new use to a vital (and often controversial) market for corn and soybeans. On one hand, biofuels just make good sense — a renewable, domestic source of energy. Yet, political whims, inconsistent policy and opposition from varied stakeholders have consistently challenged biofuels.

“The status of biofuels is still relatively uncertain because we’re still looking for policy guidance across the number of areas, but we’ve seen a lot of development on the oilseed processing side. There’s been a number of new crushing plants. We had three ribbon cuttings just this past fall,” said Michael Reginelli of Illinois-based Advance Trading. “In Ohio, Cargill had an expansion at Sidney and Louis Dreyfus has plans to build a plant in Upper Sandusky. If you look at the existing footprint of processing plants in the state of Ohio, once the Upper plant is built, when you look at the state production, you’re pushing maybe 75%-80% of all the beans in the state. It would be the highest concentration of any state from a processing plant capacity standpoint versus the state’s production.”

The driving force behind the crush expansion is renewable diesel.

“Renewable diesel has overtaken biodiesel. Biodiesel has been around 30-plus years. Renewable diesel is different because it’s chemically identical to traditional diesel, but with lower emissions and a lower carbon footprint. Vegetable oils tend to be one of the largest feedstocks and soybean oil is the easiest for the U.S. to produce in mass, but then there’s tallows, fats and greases, used cooking oil. All this other stuff can be used too, but it really comes down to how much supply we can get in bulk consistently and dependably,” Reginelli said. “Renewable diesel is a good thing for farmers because it’s domestic demand. What you want is clarity around policies so you can depend on this being economically viable longer term. We do two things with beans in this country: we either export them or we crush them. The exports have been trailing off. Back 20 years ago, the U.S. was the largest soybean exporter in the world. That is not the case by a mile today. Brazil continues to grow bigger crops and then you look at Argentina and their expansion. Renewable diesel is creating more domestic demand for growers. There’s a lot of moving pieces to make this viable longer term and unfortunately government and policy has some say in how this goes.”

Years ago, I sat in many meetings seeking ways to add value to soybean oil as the much lower priced component of the soybean. In one of the more amazing flip-flops in modern agricultural history, that has completely changed. Meal — the not-that-long-ago driver of soybean demand and value — has become the less valuable component of soy.

“Now, markets for soybean meal will be one of the biggest hurdles of this entire thing. Honestly, we’re already feeling the impact on meal,” Reginelli said. “There were record-low cash meal trades and basis in the western Corn Belt in January and our export markets on meal are under pretty heavy pressure. We’re not increasing our animal herds nearly at the same rate that we’re increasing our demand for oil processing, so that’s going to be a challenge.”

A quarter-century ago, ethanol was the clear king of biofuels. That has changed too. On the corn side, frustrating federal policy quagmires are holding up the clarity needed for big potential ethanol demand boosters including year-round E15 and Sustainable Aviation Fuel (SAF).

“The SAF policy is incredibly important on the pathway forward for ethanol. I’m hoping that we get clarity, but I thought we’d get clarity long before now and it’s still  messy. It’s hard to predict when and where Washington will actually provide clear guidance. If you’re a farmer, the reason that you want SAF to happen is, though we’re not necessarily driving less miles in America, the consumption of fuel is tipping lower. Electric vehicles are now 6% of our vehicle fleet and traditional internal combustion engine vehicles are becoming more fuel efficient. So, we don’t have as big of a need for gas and ethanol,” Reginelli said. “So then the next question becomes, what do we do with this stuff? There’s a lot of technology going into hand sanitizers, pharmaceutical and cosmetic usage on the byproducts side of ethanol. There are new technologies and markets being carved out to diversify just from being a fuel source. SAF would easily be the biggest pull, but I think even if we adjust policies, it’s probably 2030 before we even really feel the impact of it. From the corn side of things, we’re more competitive from an export standpoint and corn is more diverse from its demand base than beans, so that’s a good thing. And, if we ever get to the point where we can black-hose E15, that would make a tremendous dent in our corn balance sheet. If we want longer term viability for ethanol, the policies around SAF and E15 will make a tremendous difference.”

With prospects of biofuels still tied to blundering federal policy and political whims, I guess some things really have not changed in 25 years.