Biodiesel Producers Facing Tighter Margins

John Davis

Despite increased demand for biodiesel, makers of the green fuel are having a tougher time making a profit.

This article from Reuters says sales of American biodiesel tripled last year to about 250 million gallons and will go even higher next year. But the success has been a double-edged sword:

[T]he sales jumps have had the side effect of helping to spike prices for soyoil, the main U.S. biodiesel feedstock, to nearly 33-year highs. Plants that make biodiesel are running well below capacity because of rising costs.

“As a general rule, margins for making biodiesel are pretty tight now,” Jenna Higgins, a spokeswoman for the (National Biodiesel Board), said in an interview.

Higgins said some producers were making negative margins, but that the soyoil boom could be followed by a bust cycle that could help profits in the future.

The article goes on to say that biodiesel’s link to petroleum (that helps plant and harvest the feedstock soybeans and the energy used to get the product to market) and its record-high prices are not helping the situation. But officials are optimistic that a new pipeline system that can handle biodiesel will be built and more affordable feedstocks will be found.