The last few weeks have been incredibly difficut for biodiesel producers. Decreasing energy prices and increasing feedstock prices have left a lot of producers filling contracts at a loss.
Heating Oil (HO) has traded as low as $1.30/US Gal in recent weeks but the price of common biodiesel feedstocks have been soaring higher. HO is a commidty that is commonly used to price biodiesel due to the similar nature of the two products. HO is traded via the New York Mercantile Exchange (NYMEX) which allows all parities to see the pricing structure.
Biodiesel margins have been paper thin under the best of conditions in the last year or so. With feedstock prices moving in the opposite dirceton of energy, the margins are headed well into the red, if they haven't already been there.
Recent trade restrictions placed on US producers by the Euorpean Union (EU) have further hurt the US biodiesel market. With many biodiesel prodcuers struggling, the market place has been flooded with product that has been sitting in inventory, effectively keeping the price of biodiesel low. A lot of the cheaper biodiesel was likely produced with the intention of selling overseas prior to the sanctions imposed by the EU.
A non-transparent marketplace for Choice White Grease (CWG) has added to the complications. Even if a producer has a supply agreement with a packer, the price is unknown until a week prior to delivery. The price is generally set locally by the packer for what they feel demand is for the upcoming week. The packer can be influanced by the price of Soy Bean Oil or other comparable oils. This means they will price the product higher if Soy Oil has traded higher. This makes it very difficult to get a hedge on the product. Without being able to lock in feedstock prices it makes it very difficult to price biodiesel out more than a couple weeks.
Soy Bean Oil (SBO) has virtually priced itself completely out of the biodiesel market, unless there are buyers that will purchase Soy Methyl Esters (SME) product. These buyers are few and far between. The only producers that are able to make SME work financially, are those producers that are crushing the soybeans and getting value out of the meal. Even those facilities would be better off just selling the oil rather than making it into biodiesel.
Current biodiesel bids in the Midwest are HO + $0.08. That means at the time of writing this, the price of B99 biodiesel is near $1.48/gallon. CWG is trading today at $0.26/lb of $2.05/gal. Using the industry standard of $0.65/gal cost of production puts the end B100 at $2.70 or B99 at $1.70. This calculates into a loss of $0.22/gal on new product, with limited ability to hedge future sales or price out farther than a few weeks at a time.
It has been rumored that Funds and Speculators are once again driving up the price of feedstocks. These are the same funds and speculators that drove Crude Oil to $150/barrel before it came crashing back to where we are today.
I feel like it will take time to get through these large stores of invetory. Once we do however, it will allow our industry to price the product based on production costs, feedstock costs and demand.
In what seems to be a last ditch effort by the Petroleum Marketers and the Iowa Motor Truckers, they have decided to rely on one of the oldest myths and a hot button topic from over a year ago.
I'm talking about the myth of a B5 blend gelling and the controversial topic of Food vs Fuel.
IMTA and PMCI are telling House members that a B5 blend of biodiesel will most certainly gel in the months between October and April. Hoping that the House members won't realize that Diesel Fuel already has the problem of gelling in cold weather.
Our industry is trying very hard to dispell these myths but it becomes very difficult when an organizations such as IMTA and PMCI are using juvenile tactics like "I heard this..."
The facts are simple and the facts are clear. A B5 blend of fuel is just like petroleum diesel fuel, except for the fact it is better for your engine, the environment, and Iowa's economy. Here are the cold flow facts.
You can even go to here to find the Top 10 questions regarding biodiesel blends.
I thought that the Food vs Fuel debate ended when renewable fuel prices dropped and food prices did not. We have seen little to no reduction in food costs even though commodity prices have fallen. Read more about the subject here.
PMCI and IMTA are pushing hard, telling House members that several large trucking firms will not buy fuel in Iowa if there is a fuel quality standard. If you use biodiesel I encourage you to call your State Representative today to let them know that you do use biodiesel and will continue to do so.
Find your Iowa House Representative by clicking here.
More to come....
The Iowa Senate passed SF 464 on Wednesday evening paving the way for a fuel quality standard to be enacted in teh State of Iowa. The bill must now pass the Iowa House of Representatives.
In what some are calling a mostly "party line" vote, SF 464 passed the senate on a 31-19 vote.
This bill relied heavily on the work that the State of Minnesota has done over the past five years. Minnesota currently mandates 2% of all diesel fuel to be biodiesel. The Minnesota mandate increases to 5% on May 9th of this year and jumps to 10% in May of 2012.
This bill will have a huge impact on the biodiesel industry in Iowa. The bill will require all retail diesel fuel in Iowa to conatain a minimum of 5% biodiesel.
Skeptics of the bill have said that gelling and warranty issues will cause some customers to buy from out of the state. Our industry stands behind the ASTM's recent decision that a 5% blend of biodiesel is no different than petroleum diesel fuel, from a gelling and quality standpoint. A 5% blend however will significantly reduce green house gas emissions and improve the life of the engine and it's injectors.
During the debate over this bill it was stated by one Senator that the OEM he spoke to on the phone stated that they would prefer a 5% blend of biodiesel be run in the eninge rather than just straight petro diesel.
Witht he introdction of Ultra Low Sulfur Diesel (ULSD) inot our fuel stream over two years ago, biodiesel has been widely accepted as a replacer for the Sulfur that was taken out of the diesel. Petro diesel is hard and abrasive and has been the cause of many injector failures. Just a 2% blend of biodiesel will increase the lubricity of the fuel by 60%. This fact has been a godsend to many farmers and fleet operators with older equipment.
More on this bill as it progresses through the house....
Yesterday (wed, March 25), I was fortunate enough to be able to visit the state capitol building and visit with some of our legislators. I was also fortunate enough to be able to represent the biodiesel industry in a sub-committee meeting regarding the fuel quality standard our stae desperately needs.
I have never been part of state politics so teh meeting was a new thing for me and I really didn't know what to expect. I ws surprised to find out that the meeting was open to anyone that wanted to participate and that the sub committee was interested in hearing from everyone in attendance.
A majority of the people present, like myself were representing all of the good things that the biodiesel industry brigns to our state, our environment, and our economy.
Some people were tehre to bring up legitimate concerns, not necissarily against biodiesel but in conjuction with pricing and how school boards and counties will be able to handle the switch.
Then there was the Iowa Motor Truckers Association (IMTA) and the Petroleum Marketers and Convenience Stores of Iowa (PMCI). Both of which did not have legitimate concerns and decided to play the Myths and Rumors tactic to try and scare away the senators.
Neither association presented a legitimate fact based arguement. Instead IMTA and PMCI decided to tell the senators things they had "heard" from other sources. Here are a list of their bogus concerns and the half-truths they tried to pass off as facts:
MYTH - Biodisel blends will void the warranties on all major engines. Warranties only cover 2% to 5% blends and any issues that arise after using biodisel will void teh warranty. They then stated several engine manufacturers (OEM's) that they say only cover 2 to 5% blends.
FACT - All engine companies warranty the product they make, meaning engines. They warranty their engines for "materials and workmanship." Because these companies do not make fuel they do not cover the fuel specifically, whether it be biodiesel or petro diesel. This being said biodiesel usage will not void a warranty just like petro diesel usage will not void a warranty. For a list of major OEM's and their recommend biodiesel blend usage click here..
SCARE TACTIC - 60 Trucking companies had called into IMTA's office and stated that if a fuel quality standard was put in place, that they would bypass Iowa and buy fuel in other states.
FACT - It may be possible for a trucking company to bypass Iowa and not buy fuel in a state or two, however it becomes a logistical nightmare to enforce such an act. Another interesting piece of information regarding this, is that PMCI had sent an email out to their members the day prior stating that they had surveyed trucking companies and some had indicated that they would by-pass Iowa. It seems as though IMTA latched onto this information and then tried to pass it off as factual information. Decker Truck Lines in Iowa is a strong proponent for biodiesel in Iowa as well are numerous other trucking companies. Click here to see a brochure from www.biotrucker.com that contains testimonials from truckers supporting biodisel.
HALF TRUTH - Biodiesel costs more than diesel fuel and therefore will raise the cost of diesel for truckers and retailers, potentially putting them out of business.
FACT/MY OPINION - This is only half true. Historically biodiesel has been more expensive than diesel, however over the last several months it has been drastically cheaper. A biodiesel blend of 5%, which is what the fuel quality standard is asking for, would only raise the price of diesel fuel at worst $0.02, an amount far less than the money that will be saved on equipment longevity. I have never known the retailer to take on an expense that they couldn't pass onto the customer, seems unlikely that they are going to eat the $0.02. Lastly, we require 56 truckloads a week at our small facility. Shutting down our plant would likely put a small truck fleet out of business.
MYTH - There has been all kinds of trouble with trucks in Minnesota related to the mandate there. They presented one fleet manager's email stating that he had one truck require over $2,000 worth of equipment repairs related to biodiesel and several other's require hundreds of dollars worth of repairs. The date of the email was December 2008
MY OPINION - I'm not going to argue that the guy didn't have trouble, nor am I going to argue that he didn't have trouble with fuel, but it seems unlikely that troubles of that magnatude were the cause of biodiesel. It was likely injector failures caused by abbrasive ULSD and water in his fuel.
FACT - Minnesota implemented a hotline for consumers to use when they have difficulties with biodiesel. In 2008 there were 129 calls to the hotline, after further investigation it was determined that only 3 of the calls were legitimate issues with biodiesel and those 3 calls were related to storage issues and water contaminating the fuel.
The most frustrating part of IMTA's and PMCI's arguement was that they seemed to not support biodiesel at all. When our industry was trying to promote incentives for biodisel usage both associations were on board and publicized their support. Now that the incentives are set to go away and effectively taking easy government money out of their pockets, they no longer support the product.
Shame on you IMTA and PMCI for trying to dupe the government and your customer's with hear-say and myths. The next time you want to line your pockets with tax payer's dollars come prepared with facts.
Typical, the Peteroleum Retailers are trying to squash a proposed biodiesel mandate in the state of Iowa, through a grass roots smear campaign. They don't care about our economy or our environment, they only care about themselves.
An update was sent out by the Petroleum Marketer's and Convenience Stores of Iowa (PMCI) today encouraging it's members to contact key legislators to urge them to shoot down a biodiesel mandate that would be a "burden" on consumers. They strengthed their position by using a minipulated survery that showed that trucking companies would bypass Iowa if a mandate was in place.
Hogwash!
This is typical PMCI. They are not doing the right thing for our state, they are spreading half-truths and one-sided information. PMCI could care less about the consumer and they only care about increasing their members profit margins in an economic troubling time for consumers.
They want "incentives" instead of a mandate. Incentives that would line their pockets similar to the lining that gas and diesel fuel has provided them. Mandates cost the consumer and the state nothing! You are already mandated to use ULSD, you don't hear them tyring to repeal this mandate.
They state that "Trucking companies surveyed recently revealed they would bypass Iowa for fuel if a mandate is adopted."
Where are they going to go?! The crossroads of the nation occur in Des Moines where I-80 meets I-35, this is where Canada meets Mexico and the Pacific meets the Atlantic. Bypass Iowa for fuel?! Are they going to go to MN, IL, or MO instead, probably not because those states already have some form of mandate or an incentive that acts like a mandate. Has any of those states seen a decrease in fuel purchasing? No!
PMCI should be embracing a biodiesel mandate instead of fighting it. It would finally give them a product they could be proud of promoting and selling. ULSD is harmful to diesel engines, a B5 and higher mandate would improve these negatives. ULSD is harmful to the environment and emitts known cancer-causing emissions. Biodiesel would all but eliminate this. ULSD is prodcued form Crude Oil purchased from foreign, war-torn locales. Biodiesel is produced right here in Iowa from renewable resources.
It's time the tables were turned on PMCI. I urge anyone reading this to call, email, and write PMCI and tell them that it is time to start supporting a biodiesel Mandate in the State of Iowa, because this is what Iowans need not what the retailers need!PMCI Website. email info@pmcofiowa.com or call 515-224-7545
You also need to contact your legislator and let them know that Petroleum Retailers in Iowa are not telling the whole truth about biodiesel. Iowa Legislature Website. Call them and let them know you support a biodiesel mandate. A grass roots approach from investors and biodiesel supporters is the only way to save our economy and our environment!
Senate File 294 has passed the transportation committee with only one person so far opposing it. It is now known as Senate File 408.
Today March 18, 2009 it goes in front of the Ways and Means committee. If you haven't done so. Please contact your senator to support this file.
While talking with your senator make sure that you tell them that you are opposed to the mandate being implemented at the "Rack".
The Rack has not been interested in renewable fuels what so ever. If they were interested in renewable fuels prior to this they would have made biodiesel available. This is a way for the Rack to capitalize on the good things we are trying to do in Iowa.
As an example, where biodiesel is available at the rack it has been selling for $0.70 to $0.80 above the market. This is creating a negative view of biodiesel, turning many people away.
So in short, call your state senator @ 515-281-3371 and tell them to support Senate File 408 but to oppose the implementation at the rack. You can find your senator here.
President Obama announced his stimulus package recently, calling for an increase x 2 in renewable energy usage over the next three years. I applaud him for such drastic increase.
I believe he is overlooking the current Renewable Fuels Standard
There is no teeth in the current legislation that requires Big Oil to use renewable fuels. There are rules that state that they must use renewable fuels, but no consequence if they do not.
Requiring the EPA to set severe consequences will go a long way to solving two major problems facing the US today. Modifying the RFS to enforce renewable fuel mandates would go twice as far.
First and most obvious, it will help the US become more energy independant. Our reliance on foreign produced fuels will be cut severely.
But the more important issue today is the spark that it will provide to our ailing economy. Using domestically produced fuels that will spike the income of US citizens not foreign owners.
Annually, there is over 40 billion gallons of on road diesel fuel used, according to the EIA. A 2% on-road mandate of Biodiesel would mean the displacement of 800 Million Gallons of foreign oil. It would mean that over 60% of the emissions produced by diesel vehicles would be cut.
But most importantly it would mean a stronger economy today, not in three years. Now is the time act.
Email President Obama and tell him your thoughts.
This economy is tough for everyone. Present company included.
That's why it's vitally important for state governments to be wise when enacting any new legislation that might have an adverse effect on our very weak economic situation.
Approving biofuel mandates is among the legislation we're hoping for. And here's why;
A mandate in the state of Iowa will not cost the government a single penny; in fact, it could raise a significant amount of income tax.
The overwhelming majority of biodiesel plants in the state of Iowa are owned and operated by Iowans. Therefore, most income these facilities earn will be taxed by the state as opposed to petroleum profits, which typically find their way overseas.
The mandates will mean Iowa-made fuel in the tank of every, tractor, pickup truck, and semi-truck in the state.
It will mean more jobs for Iowans.
It will mean cleaner air for healthier Iowans.
And it won't cost the state a single dollar to implement.
Success like this can happen in other states as well. So, Iowan or not, push your state representatives for a biodiesel mandate. It's the cheapest way to save our economy and our environment.
State of Iowa resident's can contact their representative by clicking this link
It can be bitterly cold here in Iowa during the winter months. In fact, as I type this, we've reached a high of -5, and it's the middle of the afternoon.
For farmers, truck drivers, and other diesel users these months can be particularly stressful.
Most people realize that diesel fuel needs to be treated during the winter months in the Midwest. It's very common for people to buy a winter-grade mix of diesel fuel, which is generally a mix of #2 diesel with either #1 diesel or kerosene.
That's why it continues to surprise me to hear even the most religious users of biodiesel say they don't use biodiesel in the winter. They fear fuel gelling.
I'm here to tell you, don't worry.
Biodiesel blends up to 20% react identically to the cold as the fuel it is blended with. Most blends purchased at retail are blended well below 20% -- typically around 5% to 10%.
The ASTM has recently stated that a 5% blend of biodiesel is no different than regular diesel fuel and should have to meet the same standards as diesel fuel, D975.
So don't worry about your biodiesel blends in the winter. As long as you treat your biodiesel blend like you treat your winter diesel fuel, you canuse it year round, I do.
Today’s topic is geared mostly to fuel distributors, retailers and people who buy directly from fuel distributors.
You can tell a lot about the fuel based on its certificate of analysis. This certificate includes water content and oxidative stability, two things that are vitally important when it comes to the fuel’s shelf life. The certificate also includes cloud point and cold flow filtration, which will show you how the fuel will perform in cold weather.
Every load of fuel that leaves our facility is accompanied by a corresponding third-party certification. If you are currently buying biodiesel and do not receive a third-party certification, ask for one. It will help you determine if you are getting a quality product.
You should buy your fuel from a producer that is willing to stand behind their quality control program. At Riksch BioFuels, we do an extensive amount of testing on all of our fuel. We have an wide-ranging quality control program that includes hourly testing of in-process fuel and a third party certificate of analysis performed on every 30,000 gallon lot of fuel.
This third party certificate is an unbiased view of the fuel that we produce. From this certificate you can determine that great care was taken to make our fuel.
Keep in mind that all of the accreditations and certifications a producer can receive will not ensure that you are getting a quality product. It’s important that you buy your fuel from a source willing to stand behind the product.