Biofuel costs draining the field

The enthusiasm for biofuel production has cooled significantly — and the great irony for producers is that it is the very drive for alternative fuels that has pushed raw material costs out of sight.

“We can’t even come close to our capacity, and it isn’t because there’s not demand for biodiesel,” said Ken Arnold, president and CEO of Memphis BioFuels. “We’re selling everything we make.”
“When you add your chemical costs and operating costs and then sell to a customer that wants a discount to make it worthwhile to them, you’re losing money on every gallon you sell,” Arnold said.

On soybean-based biodiesel, he’s losing 30 cents a gallon, even with the $1-per-gallon government subsidy.

“Memphis BioFuels has the right idea” because it doesn’t rely on one energy source, said Andrew Couch, executive director of West Tennessee Clean Cities, a federal initiative to promote biofuels.

“Becoming dependent on soybeans, even though it’s not petroleum, is still a problem because you’ve given up one dependency for another,” Couch said. “There are are lot of different ways to make biofuels. It just takes time and research.”

When the industry started in 1998, soybean oil was 12 to 15 cents a pound, said Pete Moss, president of Frazier, Barnes & Associates, local consultants in renewable fuel sources.

But with the biofuels industry growing more than 100 percent a year since, the problem is that farmers can’t raise enough soybeans to feed the need.

The other problem, of course, is the rocketing price of agriculture commodities, tied to the value ethanol production has put on corn.

Corn and soybeans compete for the same cropland. With so many more farmers this year planting corn, 15 percent fewer acres nationwide were available for soybeans, which drove up the price.

Commercial Appeal