Study: Biodiesel Boosts Revenue for Iowa’s Farmers

Joanna Schroeder

A new study released today during the 7th Annual Renewable Fuels Summit quantifies how biodiesel production boosts revenue for Iowa’s crop and livestock farmers. The study’s results demonstrate that when Iowa farmers use biodiesel, they not only positively impact Iowa’s economy, they boost their own bottom line. The study was conducted by John Urbanchuk, an economist with Cardno Entrix and was supported by the Iowa Renewable Fuels Association (IRFA), Iowa Soybean Association (ISA), Iowa Corn Growers Association (ICGA), and Iowa Biodiesel Board (IBB).

iarfa-13-urbanchukDuring the unveiling of the study, Urbanchuk said, “Biodiesel producers are part of a manufacturing sector that adds substantial value to agriculture commodities produced in Iowa and makes a significant contribution to Iowa agriculture. Increased biodiesel production raises both soybean and corn prices and boosts revenue for Iowa crop farmers. Since increased crush demand for soybeans also increases production of soybean meal, an increase in biodiesel use and soybean oil demand will reduce soybean meal prices to the benefit of Iowa’s livestock producers.

Seventy-two percent of all biodiesel produced in Iowa was produced from soybean oil in 2012. This increased demand, said Urbanchuk, benefits Iowa’s growers by raising the price of soybeans by more than 8 percent, and increasing the price of corn by more than 5 percent. For example, for a corn and soybean grower with 400 acres, this would equate to a more than 9 percent increase in net profits. In addition, demand also reduces the cost of some feed ingredients, such as soybean meal, by more than 13 percent and distillers grains by 5 percent.

While soybean oil was the leading feedstock last year, the biodiesel industry also used nearly 250 million pounds of animal fats. Taking into account both production costs and revenues, biodiesel production boosts the net income for an Iowa farmer finishing cattle by more than $16 per head. In addition, the study found that the industry also decreases production costs for hogs while increasing revenue leading to a net income for an Iowa hog farmer by more than $4 per head.

When crop and livestock production are combined, the benefits to Iowa’s farmers are even greater. Taking into account both production costs and revenue an Iowa farmer raising crops and cattle would see nearly a 17 percent increase in net income, while an Iowa farmer raising crops and hogs would see nearly a 20 percent increase in net income.

“The bottom line is that biodiesel has a net positive impact on finishing hogs and cattle in Iowa,” added Urbanchuk.

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