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sdholloway56
Senior Advisor

Biofuel crackup

The edible oils market is severely stressed- some poor crops but also extreme distortions from US biodiesel owing to the RIN market and some clean diesel credits.

Meanwhile, global nitrogen prices have exploded owing to NG shortages in Europe and China. If the US ends up planting 10M or more fewer corn acres next year- plus what the rest of the world does- and yields happen to be poor, you got a big problem.

That on top of a growing consensus that biofuels were only a temporary bridge that came with some big downside.

On the other hand you’ll be able to crow “food inflation!” till the cows come home. That would be the ones that don’t get liquidated.

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5 Replies
sdholloway56
Senior Advisor

Re: Biofuel crackup

A $2.50/therm rise in NG adds about $80 to the cost of making a ton of NH3.

The US N oligopoly is making an unconscionable amount of money right now and selling to the highest global bidder.

If you can use the DPA to force the Mexicans back to work and save the pork "industry" you can embargo exports and oversee maximum production from domestic plants.

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sdholloway56
Senior Advisor

Re: Biofuel crackup

Ethanol is, after all, just a way of taking fossil fuels- prmarily NG- and perhaps expanding them a bit and turning them into a liquid fuel.

Biodiesel is a pretty good fuel. The problem is that fats are a lot harder to grow in quantity than carbohydrates- there's never going to be enough to really make a big difference.

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rickgthf
Senior Advisor

Re: The shortage of vegetable oils is connected to ....

The whole vegetable price boom is connected to the poor palm oil production in Asia due to poor yields and lack of labor to harvest due to the Pandemic. 2021 palm oil production is about 72 million MT compared with 61 MMT of soybean oil.

There is no shortage of soybeans to crush but beans can't be crushed for oil unless the soy meal has a ready market because it can spoil so it limits oil production.

Don't complain about biodiesel driving up the price of cooking, just be glad that in normal times biodiesel is there to soak up the oil and allow the production of the soy meal.

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sdholloway56
Senior Advisor

Re: The shortage of vegetable oils is connected to ....

Soy is huge but still a pretty weak oilseed.

 

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rickgthf
Senior Advisor

Re: A full half the energy cost of ....

A full half the energy cost of making corn ethanol is the process steam & electricity needed. The next most energy/nat. gas cost is fertilizer nitrogen but at a pound of N per bushel of corn produced (1/56).  Believe it or not, it only takes 3/4 pound of methane to make a pound of ammonia,  or 0.95 lb methane to make an lb. of urea N so your carbon cost for a  bushel of corn becomes (1/56x 3/4)=1.3% of corn produced.

If ethanol plants were simply required to use biomass to make process steam and co-generate electricity, the fossil fuel demand declines very substantially.  Instead of energy used per ethanol energy produced being 60% it would be more like 20%.

  But the real advantage to corn ethanol would be to capture & sequester the carbon dioxide produced during fermentation.  Do that and the fossil carbon cost of ethanol disappears and actually becomes net negative, namely you're sequestering far more carbon than you use.

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