Are Mid-South farmers ready to become fuel producers?

With an expanding biodiesel industry, Mid-South farmers are poised for a change in the way they’re perceived by consumers — with their image morphing from food and fiber producers to food, fiber and fuel producers.

To several experts attending the National Agri-Marketing Association’s May luncheon, it makes sense that the ability to produce renewable, environmentally friendly fuel should take front and center stage for agriculture’s future. In fact, some figure that the next farm bill could focus on agriculture’s ability to produce fuel with less of an emphasis on food and fiber. If there was ever a time to capitalize on a hot public issue, this is it.

But exactly what is the role of the Mid-South in the renewable biofuels equation?

According to David Fraser, soydiesel ambassador for Delta King Seed and a speaker at NAMA, biodiesel can carve a sizable niche market in the region. How big it gets depends on three things — availability of feedstock, cost of feedstock and local crushing capacity.

Currently, soybeans are the primary feedstock for producing biodiesel in the Mid-South, and the United States. And there are plenty of them, according to Fraser. For soydiesel to replace 5 percent of total diesel consumption would require 2.08 billion bushels of soybeans. “Last year, we produced 3.08 billion. So we have enough soybeans. There are a lot of other uses for soybeans, but it is doable.”

In the past, much of the biodiesel used in the Mid-South was shipped from Iowa and Ohio. Now there are a number of biodiesel plants on line in the Mid-South including Eastman Chemical, Batesville, Ark., and Patriot Biofuels, Stuttgart, Ark., which came on line three weeks ago. In addition, there are a number of announced plants, including Milagro Biofuels in Memphis, which is expected to be on line by the end of the year.

For biodiesel to grow, soybean producers may have to rethink their roles, perhaps think of themselves not as oilseed producers, but as fuel producers.

That means looking at other feedstock opportunities to see if they can be produced in the Mid-South. For example, rapeseed and canola are ideal candidates for a feedstock, boasting an oil content of around 42 percent, versus soybeans at 18 percent.

While soybean oil content could be improved through genetic engineering, another option is to double-crop oilseeds. For example, rapeseed, a winter crop, might be planted as a double-crop after soybeans are harvested.

Soybean oil is certainly not the cheapest feedstock, Fraser noted. “Refined soybean oil is 25 to 28 cents a pound. But I just heard this morning that a load went to Patriot Biofuels for 30 cents a pound, so it’s starting to go though the roof. You can get chicken fat for 16 cents a pound.”

Crushing capacity is also a limiting factor, with only a handful of plants in the Mid-South. With startup costs of around $14 million, no new plants are currently on the drawing board.

On the other hand, there certainly doesn’t seem to be a shortage of investment money for biofuel, according to Ken Eriksen, vice president, Informa Economics, formerly Sparks Companies.

“You have a lot of hedge funds chasing ethanol like crazy. Biodiesel is different because you have a lot of participants who may have their own fleet of equipment or vehicles. And the financial incentives are different from ethanol on the front end. But the biodiesel industry has gained a lot of ground in a short amount of time, relative to ethanol.”

Currently, most biodiesel plants in the Mid-South are relatively small producers. A 3-million gallon (annual production) plant will cost about $1 million, “not a big chunk of change to start a biofuels plant,” Fraser said.

But demand for biodiesel could change things dramatically, according to Fraser, “when Cargill, ADM and Bunge decide to push further south (with biodiesel plants). When you start getting the energy companies involved, all bets are off. But there is a window of opportunity for the smaller, local plants to get going.”

One plan is to crank up small biodiesel plants that service the surrounding areas, such as local farms, school districts and public works.

“We have farmer-owned gins in the cotton business. Why not do that with the biofuels? Grind out biofuel for the local industry,” Fraser said. “There is a lot of business there. We need to start organizing some farmer co-ops for crushing and building biodiesel plants. Still, some folks are looking at it as a get-rich-quick plan. That scares me a little bit.”

Tim Price, executive vice president of the Southern Cotton Ginners Association added, “There are a lot of dynamics that have to be worked out. But here in the Mid-South, we have such a transportation advantage.”

That includes the Mississippi River, no less that five Class 1 railroads converging in Memphis, as well as the interstate system.

Another potential concern is what to do with byproducts associated with producing feedstocks, such as meal and glycerin for soybeans and DDGs for corn, according to Eriksen. “DDGs are not the best thing to transport around the country in small lots. The Mid-South becomes an advantage in that regard because of it transportation advantage.”

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