Two Rising Biofuels Trends: Corn Oil Biodiesel and Sorghum Ethanol

Corn oil is a new favorite product at ethanol plants. Same song, second verse.

The EIA reported earlier this week, that ethanol plants are responding to the difficult market conditions by adding corn oil to their production schemes which improves their margins. “POET Biorefining in Macon, Missouri, and Abengoa in Madison, Illinois, may add corn oil recovery units in 2013.” (Some already produce it.)

A recent futuristic graph provided by the University of Missouri helps us visualize it better:

Furthermore, this graph shows that there is room for growth in the biodiesel category of the biofuels industry. According to this Biodiesel Magazine article, today’s “biodiesel penetration in the diesel fuel pool comes in at a meager 1.9 percent.”

Corn too expensive? A number of ethanol plants are beginning to use sorghum as ethanol feedstock. Aemetis in Keyes, California, is changing its feedstock from corn to sorghum and replacing its natural gas consumption with biomass. Poet is expanding sorghum ethanol production through contracts set up this coming year in South Dakota. And in Nebraska, where there is extreme drought and reduced irrigation, more sorghum may be produced and used at ethanol plants, too.

Sorghum is heat and drought tolerant, and it is a drop-in replacement for corn ethanol producers. No small part of the issue is that in late 2012, the EPA approved a pathway that qualified sorghum ethanol as an advanced biofuel. According to the EPA, grain sorghum-produced ethanol has a 32-percent reduction of greenhouse gas emissions compared to gasoline, a reduction that beats the 20-percent threshold needed to qualify it as a renewable fuel.

Also, from the EIA are other avenues that ethanol plants are using to improve their profit margins:

Other companies plan to produce butanol rather than ethanol, or integrate cellulosic feedstock, such as wood waste or corn stover (e.g., leaves, stalks, and leftover cobs after the corn harvest). These approaches allow their products to qualify as advanced biofuels under the RFS, a category that specifically excludes ethanol produced from cornstarch, which has been the dominant feedstock for the U.S. ethanol industry.

I continue to believe that, contrary to ongoing fear mongering headlines that you see now and then, overproduction of Ag commodities with consequent low prices is the biggest future challenge for agricultural producers. Today’s industrial methods have become very efficient, and are on course to continue to improve that efficiency. Nations abroad are buying more and more mechanized farm equipment, and dramatically increasing outputs, too. Many see Africa as being a huge new frontier in the quest to conquer arable land. At the same time, science is advancing, along with smarter dietary awareness, and unprecedented communication capability enables the exchange of important information to farmers across the world. However, industrial Ag production is heavily reliant upon fossil fuel inputs, and, consequently, energy commodity prices would have to remain at reasonable levels (or be highly subsidized) to allow for current production methods to dominate and overproduce.

What does that have to do with biofuels?

That means that biofuels policies will continue to create the demand needed to keep up Ag commodity prices above the cost of inputs, and lobbying groups will work hard to make sure that happens. The only thing that could stand in the way would be intolerably high food prices. Or, demands by consumers for a healthier and more environmentally friendly food production system that could gain political traction. I doubt that weather events will change so rapidly that food production cannot adapt, at least over the next few decades, but some would disagree. Because, in the end, the debate is still about “food versus fuel” and the public and the rest of the world will only tolerate so much food price inflation at the expense of the environment, too.

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