|
 The situation in the Red River Valley illustrates the paradoxical state of the nation's biodiesel industry, and the decisions facing crushers over whether to refine oil for food or fuel.
On one hand, only a quarter of the current production capacity is being used and the number of new plants coming on line has slowed dramatically. On the other, biodiesel sales volume continues to rise, and government mandates call for even more biodiesel use in coming years.
Northwood Mills LLC in Northwood is not giving up on refining vegetable oil, but it is drastically changing its focus. Instead of crushing soybeans for the biodiesel market, it's switching to canola for the food market.
Part of the reason is a decline in the Canadian hog industry that has been a primary market for the plant's soybean meal, a byproduct used for animal feed. General manager Clarence Leschied said the company also has soured on soybeans.
"The demand (for vegetable oil) from the biodiesel sector has just about disappeared, whereas canola going into the food market still has good demand," he said. "We've just seen the margins on soybeans deteriorating."
Leschied said other plants also might switch from the energy sector to the food sector. "U.S. biodiesel capacity is only running at about 25 percent," he said.
Amber Thurlo Pearson, a spokeswoman for the National Biodiesel Board, confirmed the percentage. She said biodiesel producers are going through "a rough patch" because of rising vegetable oil prices. But she believes many of the nation's 171 plants were built large
-- accounting for much of the unused production capacity -- in anticipation of growth sure to come.
More passenger vehicles are being made with engines that can burn biodiesel, an alternative to petroleum-based fuels, Pearson said. A new federal law also sets a biofuels standard of 36 billion gallons per year by 2022, a sevenfold increase.
Farmers in southeastern North Dakota are counting on continued growth as they develop a plant to crush soybeans and refine the oil. The Ag Plus Cooperative plant would be big enough to crush up to 40 percent of the soybeans grown in the state.
[to top of second column]
 |
 Co-op director Dale Beck said plant officials will decide later whether it will be more profitable to sell soybean oil to the energy or food industries. "We're looking at primarily biodiesel," he said.
"Soybeans are in tight supply. Demand is very high for oil," Beck said.
The March futures price for soybean oil is nearly double what it was a year ago, Pearson said. Predictions of an increase in biodiesel demand also have helped drive up the price of oil, she said.
Leschied said demand from the food industry also is playing a role. "The food side is prepared to bid whatever it can to keep (soybean oil) from going into the energy sector," he said.
Tom Lilja, executive director of the North Dakota Corn Growers Association, said the declining value of the U.S. dollar is leading to more exports of such crops as corn and soybeans, both of which can be used to make fuel. That, in turn, leads to tighter supplies and higher prices.
"It's cheaper for countries like China to buy," Lilja said.
About 80 percent of the biodiesel manufactured in the United States is made from soybean oil. Pearson said industry officials are promoting the research and development of new feedstocks, such as algae, for biodiesel.
And new biodiesel plants continue to come on line, though the pace has slowed in the past year. Production capacity has grown from 85 million gallons in 2003 to the current 2.2 billion gallons.
"We will continue to see increased biodiesel production," Pearson said.
Northwood Mills, which broke ground two years ago and began operating last summer, thinks canola is the better oilseed for its situation.
"It looks a lot different in the world from when we started," Leschied said. "The dynamics have changed a whole bunch."
[Associated Press; By BLAKE NICHOLSON]
Copyright 2008 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed.
 |
