Following up on Cindy’s post about the Reuter’s Global Biofuels Summit, I ran across this bit of news about the future of biodiesel futures from Reuters.

The chief economist at the Chicago Board of Trade, Dave Lehman, told attendees at the summit that the biodiesel market is still not big enough to be a hedging tool.

The biodiesel market is roughly 1/40 the size of the $8-billion U.S. corn-based ethanol market, Lehman said.
“It needs to grow by a factor of four or five just to get to our minimum” to support a futures contract, Lehman said.

In comparison, Lehman points out that the board already trades five to 10 ethanol contracts each day. But that is still not enough for ethanol to be considered a price-risk management tool. He also expects the dry distillers grain market… of course, the by-product of corn-based ethanol production… to be traded before biodiesel.

Lehman expects things to be much more rosy for the ethanol futures in the near future… possibly five THOUSAND contracts a day… as the renewable fuel standards really kicks up production.