Renewable fuel | A proposal to reduce the amount of biodiesel produced in 2014 and 2015 could push down the price of soybeans
SAN ANTONIO, Texas — Proposed changes to the U.S. Renewable Fuel Standard will devastate the biodiesel industry and soybean prices, says a group representing nearly 600,000 soybean growers.
The U.S. Environmental Protection Agency has proposed a 1.28 billion gallon per year mandate for 2014 and 2015.
It would be a big blow for an industry that produced more than 1.8 billion gallons of biodiesel last year.
“We were really hoping that EPA would see the growth in our industry and the availability of feed stocks and would support us with maybe a 1.5 billion gallon mandate or maybe 1.7 even for 2014,” said Danny Murphy, chair of the American Soybean Association.
“They kind of shocked us when they went back to 1.28 (billion gallons).”
He said the proposed mandate could result in one billion gallons of actual production because of carryover from 2013.
The U.S. biodiesel industry had been on pace to produce two billion gallons last year if production hadn’t slowed.
“The EPA’s volume proposal for 2014 would effectively cut the volumes in half from current production levels,” Joe Jobe, chief executive officer of the National Biodiesel Board, said in a news release.
“I can’t think of a more unacceptable example of a call for full retreat during such an overwhelming victory.”
The EPA has also proposed cutting the advanced biofuel mandate to 2.2 billion gallons from 2.75 billion last year. The target was initially supposed to be 3.75 billion gallons this year.
Biodiesel and sugar cane ethanol from Brazil are the two main fuels in the advanced biofuel category, so the EPA proposal is a double whammy for biodiesel, said Murphy.
“It’s really, really disheartening to see that (EPA) proposal,” he said during an interview at the 2014 Commodity Classic conference.
Studies indicate biodiesel contributes 25 to 75 cents per bushel to soybean prices. So any reduced production could put downward pressure on soybean prices, which directly influence canola prices.
The biodiesel industry has become a key customer for soybean crushers, which have lost sales in the human consumption side of the business because of trans fat labelling legislation that has led to an influx of high oleic canola oil into the United States.
The U.S. Food and Drug Administration is contemplating a ban on partially hydrogenated oils, which Murphy said would eliminate another two billion pound market for soybean oil.
The ASA is requesting the FDA delay the ban for a few years until there is a plentiful supply of high oleic soybean oil.
Murphy said the proposed reduced biodiesel mandate and the elimination of trans fats could easily together shave 50 cents per bu. off soybean prices.
There is no timeline when the EPA and FDA will make their final decisions.
Murphy was encouraged by a recent statement that EPA administrator Gina McCarthy made while speaking to a meeting of the National Association of State Departments of Agriculture about the more than 15,000 comments the administration received on its proposal.
“I have heard loud and clear that you don’t think we hit that right,” she said.
“(The final rule will be) in a shape that you will see that we have listened to your comments.”