'Food THEN Fuel' paper showcases biodiesel's benefits

REG releases whitepaper countering the fallacy that increased biodiesel production raises food prices
By Ron Kotrba | April 17, 2013

Renewable Energy Group has published a whitepaper turning on its head the fallacious argument that biodiesel production takes food out of the mouths of the hungry, increases food prices and hurts consumers’ pocketbooks. Titled, “Food THEN Fuel: How the American Biodiesel Industry Is Strengthening Food Security,” the authors cite sources for the information contained in the paper.

“[C]ritics of biofuels have [tried] to convince the public that biodiesel is merely part of an amorphous group of energy sources that share the same alleged disadvantages,” the paper states. “Indeed, they would have the public believe that biodiesel not only depletes the food supply by creating a competing use in fuel, but that it also contributes to higher prices at the grocery store. In reality, biodiesel is playing a vital role in strengthening America’s food security and reducing rising pressures on food prices. Rather than competing with food, biodiesel production applies a “food THEN fuel” approach by adding economic value for food industry byproducts and sending economic signals to the market to produce more. Biodiesel production helps make the food and agricultural sectors more profitable, incentivizes the production of protein and generally helps keeps grocery items, like meat, from increasing in price more than they already would due to inflation and petroleum energy costs.”

As most biodiesel industry stakeholders are aware, soybean oil has historically been the primary feedstock for U.S. biodiesel production and still today makes up the largest single feedstock used. The bean is only around 20 percent oil or less, with meal making up the gross majority of crushed soy. Thus, the more soybeans planted and crushed, the more protein meal is available for livestock. REG’s paper states, “With a larger supply of U.S. soybean meal, a 2011 study found the prices paid by U.S. poultry, livestock and fish farmers decreased between $16 and $48 per ton. In short, without the biodiesel industry, livestock producers would have paid $4.8 billion more in feed costs over a five-year period.” Interestingly, more than 85 percent of REG’s biodiesel produced in 2012 was made from feedstocks other than soy oil, according to the company’s annual report.

The paper goes on to note that as biodiesel productions have diversified by incorporation of more animal fats, the livestock industry clearly benefits through higher demand for its byproducts and, hence, higher value. “In 2011, biodiesel demand for beef tallow is estimated to have added approximately $300 million to the U.S. beef cattle industry,” the paper says. “This is basic economics: when farmers make more money, they produce more. When there is more meat or soybean meal supply available, it relieves rising pressures on food prices.”

After benefiting livestock producers, the paper indicates that consumers also fare well by increased biodiesel production. “Biodiesel’s advantages also translate to consumers’ household finances. The margin relief livestock producers realize from lower feed costs and higher revenue acts as a restraint on consumer meat prices. This means that while plenty of other factors—such as petroleum prices—are contributing to price hikes in the grocery aisles, biodiesel production is not one of them. In fact, biodiesel is not only providing long-term relief for such price pressures, it is diversifying our nation’s fuel mix at the same time.”

Restaurants also benefit from increased biodiesel production, which, in turn, also benefits consumers, the paper states. Used cooking oil was at one time a cost center for restaurants, but given biodiesel’s demand for UCO, it’s no longer a financial liability but rather a revenue center. “From 2006 to 2011, the price of yellow grease (a combination of animal fats and used cooking oils) climbed from 11.5 cents to 42.16 cents per pound, and remains at about 36 cents a pound today,” REG states. To read the full paper, click here.