Wednesday, October 05, 2005

The Importance of ADM’s Formal Entrance into the United States Biodiesel Market

As I have written elsewhere, the US biodiesel industry is going through its first sea change. The industry has largely been characterized to date by smaller production facilities built on custom technology. The typical biodiesel plant was owned by soybean farmers and built on first of its kind biodiesel processor technology. With the introduction of excise tax credits in the 2004 JOBS Bill, and the persistent high price of petroleum, the biodiesel industry has seen a lot of interest recently. Private investors and larger public companies are investing in biodiesel plants, which is pushing the industry towards larger production facilities built on the best technologies available from outside companies. ADM's announcement of its plans to build a 50 million gallon per year biodiesel production facility in North Dakota (http://www.admworld.com/naen/pressroom/) is further evidence of this trend.

In order to be successful in today's biodiesel industry, great care must be taken to select appropriate biodiesel processor technology and to secure a source of reliable and reasonably priced feedstock. This will enable market entrants to compete effectively with the high quality, high volume biodiesel product that the market is moving towards.

As Cargill, and now ADM, move into biodiesel production, competition for the primary US biodiesel feedstock, virgin soybean oil, will increase. I think it goes without saying that these companies will prioritize supplying their plants over independent plants. Plan accordingly.

7 comments:

Jason Younker said...

"As Cargill, and now ADM, move into biodiesel production, competition for the primary US biodiesel feedstock, virgin soybean oil, will increase. I think it goes without saying that these companies will prioritize supplying their plants over independent plants. Plan accordingly."

With ADM building this new plant in Velva, North Dakota, they won't be using soybean oil. The plant is going to be built next to their canola oil crushing facility and will be using that as a feedstock.

I'm glad to see a big player such as ADM using a better feedstock than soybeans (canola oil has lower gel points and gives a MUCH better return of fuel per acre grown).

Jason Younker
Alternative Fuels Awareness Organization
http://www.iE85.com/

Scott Dunlap said...

Love your blog, yo. Let me know how I can help.

SD

Eric Bowen said...

Jason,

Thank you for the comment. You are absolutely correct. I was a bit sloppy with my wording. It would have been clearer to say, "As Cargill, and now ADM, move into biodiesel production, competition for feedstocks will increase. . . ." I believe my core point, entrance into the market by large agri-business, their almost certain prioritization of feeding their plants first and the need to plan accordingly, still stands.

Eric

InfamousDew24 said...

Biodiesel is made domestically, and it reduces our dependence on foreign oil.

InfamousDew24 said...

Using biodiesel keeps our fuel buying dollars at home instead of sending it to foreign countries.

InfamousDew24 said...

Studies have shown it reduces engine wear by as much as one half, primarily because it provides excellent lubricity.

Mac said...

I think that what you are saying is very intersting. I think that in order to mak a transition from gasoline to alternative, more environment friends sources of energy will take time and be a revolution that is oppossed by many.