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Soybean Price Jump Fueled By Biodiesel

Posted on: Friday, 24 August 2007, 06:10 CDT

By Chris Woodyard

The alternative-fuel revolution is driving prices of another energy-producing crop to near-record levels.

Soybean prices are expected to hit their second-highest average mark ever this year -- and highest since 1983, says the Agriculture Department. Soybeans are used to make biodiesel fuel.

Production of biodiesel, a renewable alternative to diesel fuel, has increased more than 1,200% in the past three years, showing how the nation's truckers are being drawn into the alternative-fuels frenzy along with the auto industry. Last week, Imperium Renewables in Grays Harbor, Wash., opened what may become the nation's largest biodiesel plant. Production target: 100 million gallons a year. By locating the plant on the coast, the company hopes to be able to use plant oils from around the world, not just U.S. soybeans, says CEO Martin Tobias.

Other big plants are planned as well, moving production from 250 million gallons last year to an estimated 300 million this year, the National Biodiesel Board reports. Growth took off after Congress granted a production subsidy that took effect in 2005.

Renewable Energy Group, which bills itself as the nation's largest biofuel plant operator, runs six plants and has three more under construction.

Biodiesel is made from animal fat or vegetable oil. Although leftover french fry grease gets the most publicity as a source of the fuel, most biodiesel is made from soybeans. It can be burned pure or as a 20% blend in diesel fuel.

The rise in soybean prices mirrors a similar boost in corn prices. Corn is the primary feedstock in the USA for the gasoline-stretching additive ethanol.

Soybean prices are rising even though stockpiles of the oil derived from the beans are also at near-record levels, says Keith Menzie, an Agriculture Department economist. That's at least partly because the percentage of soybean oil production being turned into fuel is expected to be 12% for the fiscal year ended Sept. 30, up from 8% last year and 2% the year before that.

Biodiesel is safe, clean and doesn't require engine modifications, the board says. E85, which is 85% ethanol, can be used only in a so-called flex-fuel modified gasoline engine.

Corporate fleets showing interest:

*Wal-Mart. With a 7,000-truck fleet, the retailer is trying out several blends of biodiesel. "We hope to reduce global warming and support farmers across the nation," says Wal-Mart spokesman David Tovar.

*Anheuser-Busch. The beer giant is turning to biodiesel to power some vehicles at its Fort Collins, Colo., brewery and, where available, for some of its company-owned wholesaler fleet.

Source: USA TODAY

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