Ethanol Blog

LINCOLN, Neb. (DTN) -- More biodiesel plants could be closing if the industry continues to see profit losses in 2024, University of Illinois at Urbana-Champaign economist Scott Irwin said in a new analysis on Monday.

In the past week, Chevron Renewable Energy Group announced it was closing two biodiesel plants in Ralston, Iowa, and Madison, Wisconsin, because of poor market conditions.

Irwin said in a new analysis there is potential for more plants to shutter if current economic conditions hold pat.

Irwin points to the recent renewable diesel boom as a major factor in the struggle of traditional biodiesel plants of late.

"The renewable diesel boom in the U.S. has raised a host of interesting questions about the biofuels sector," he said in the analysis, https://farmdocdaily.illinois.edu/….

"A particularly important one is the impact of the boom on FAME biodiesel prices and profits. We have long used biodiesel prices from the Agricultural Marketing Service of the USDA to compute biodiesel production profits, but the behavior of the series changed dramatically starting in August 2021."

In the latest analysis Irwin estimates profitability at FAME, or biodiesel produced using fatty acid methyl ester from renewable sources, by using a different set of data to estimate production costs more accurately.

"The new profit estimates indicate that FAME biodiesel production profits have been on a severe roller coaster during the renewable diesel boom years of 2021-2024, averaging an astounding loss of 59 cents per gallon during the early part of the boom, recovering to a historically high average level of 41 cents per gallon in the middle, and back to losses that averaged 19 cents per gallon since mid-2023," Irwin writes.

"The average loss for biodiesel producers during this rollercoaster was 20 cents per gallon. Changes in the operable capacity of FAME biodiesel plants mirror the pattern of profits and losses, with a sharp drop in capacity following the large losses of 2021 and early 2022. If the losses in 2024 to date continue, more biodiesel plant shutdowns may be in the offing."

Read more on DTN:

"Biodiesel Industry Frustrated at EPA's Latest RFS Proposal, Other Reaction," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on X, formerly Twitter, @DTNeeley

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