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Biodiesel adds value to Iowa’s ag products

Analyst: Industry benefits farmers, consumers alike

February 10, 2013
By LARRY KERSHNER, kersh@farm-news.com , Messenger News

DES MOINES - Terry Murray, a pork producer and grain farmer in rural Storm Lake, said biodiesel helps keep his fleet of older farm machines running longer.

John Grzywacz, owner and president of CIT Signature Transportation, a charter bus company, based in Ames, said his company spent more time worrying about the problems of switching to biodiesel than they did in dealing with any problems of switching.

Both men told their stories on Jan. 30 during the Iowa Renewable Fuels Association Summit in Altoona.

They were encouraging producers to participate in the IRFA's newest promotions More B for Me.

Murray said he does his own maintenance on older machines, including eight tractors, three combines, mowers and an excavator. All run on biodiesel blends.

"When sulfur was taken out of diesel fuel," Murray said, "I had to replace many injectors.

"Biodiesel eliminated all that."

Acknowledging that biodiesel has "a shorter shelf-life" than straight diesel, he said the benefits to his farming operation - longer life of machines, less maintenance and value added to the ag products he grows - offset the short shelf-life.

Likewise, Grzywacz said, "Take everything he (Murray) said about tractors and replace with the word bus and it's the same story."

He reiterated there are fewer maintenance problems in switching than he and his staff worried about.

Economic impact

John Urbanchuck, an economic analyst for Cardno Entrix, an international environmental and natural resource management consulting firm, based in Florida, outlined why farmers and consumers alike have benefitted from the biodiesel industry.

For producers, the report concluded, the industry adds value to each head of cattle of pigs, plus poultry sent to market.

For consumers it offered, as an example, that some biodiesel plants pay restaurants for waste cooking oils. The businesses don't have to pay for the grease to be hauled away, keeping consumer prices low.

The Cardno Entrix report was prepared for the IRFA, the Iowa Soybean Association, the Iowa Corn

Growers Association and the Iowa Biodiesel Board. It was released on Jan. 21.

Iowa is the nation's leading biodiesel producer with the second largest biodiesel capacity (after Texas).

According to IRFA, Iowa's 12 biodiesel plants have a rated capacity of 314.5 million gallons and produced 184 million gallons of biodiesel in 2012, accounting for about 17 percent of total U.S. biodiesel output.

"The increased demand for industrial grade corn oil," the report reads, "as a biodiesel feedstock has created a new value stream for Iowa's ethanol industry that is benefitting both biodiesel and ethanol producers.

"Since feed stocks account for the largest share of production costs and most other inputs - from labor to electricity and natural gas - are procured locally, Iowa farmers and the agriculture economy benefits more directly from renewable fuels production than most other states."

Energy Information Administration statistics indicate that nearly 6 billion pounds of fats and oils were used to produce 781 million gallons of U.S. biodiesel during the first nine months of 2012.

Urbanchuck said his study to quantify the economic impact of the biofuels industry in Iowa was focused on "what if the biofuels industry didn't exist."

Urbanchuck said the study found the biofuels industry adds value to corn and soybeans, as well as tallow from cattle and white grease from swine.

In fact, the report reads, "the impact of biodiesel demand on soybean meal prices indicated that over the five-year period 2005 to 2009, a 10 percent increase in the demand for soybean oil resulted in a five-cent per pound increase in the price of soybean oil, 24 cents per bushel increase in soybean prices and $12.90 per ton decrease in soybean meal prices."

The report estimated that demand for soybean oil for biodiesel production in 2012 increased an estimated 29 percent over year-ago levels. Which means in the absence of the Iowa biodiesel industry in 2012, Iowa soybean prices would have been 8.3 percent lower; corn prices 5.4 percent lower; and beef cattle and hog prices one percent lower.

"However, soybean meal and distiller's dried grains prices," the report said, "would have been 13.6 percent and five percent higher, respectively."

Value to producers

Urbanchuck further broke down the value of the biodiesel industry to individual producers. Taking the financial impact of biodiesel during the first nine months of 2012, then protracting that impact over the remainder of the year, the report concluded that without the industry:

A row crop farmer with 800 acres split 50/50 between corn and soybeans would see a $44,000 decrease in income.

A cattle feeder with 1,200 acres split 50/50 between corn and soybeans and finishes 3,500 head annually would see a $121,000 decrease in income.

A pork producer growing 600 acres of corn, 600 acres of soybeans and finishing 16,000 hogs annually would see a $130,000 decrease in income.

"So the biodiesel industry is a positive contributor to the overall rural economy," Urbanchuck said.

 
 

 

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