Advanced BioFuels USA

by Jim Lane (Biofuels Digest)  …  There’s a theory going around that biofuels are “government fuels” — and prices are set around a table in Washington, DC. But if you visit the big biodiesel and ethanol firms, you’ll see right away that the biggest, liveliest, noisiest room at corporate HQ represents the trading floor. This is a market of traders, and to thrive in the renewable fuels business at scale, mastering the world of spreads, hedges, offtakes and RINs is the calculus of survival.

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Over in the world of biofuels, a similar measure is the crush spread — the differential between the underlying feedstock and the market price of the fuel. Right now price for soybean oil is 32.74 cents per pound, or around $2.62 per gallon, and the B100 biodiesel contract is $3.08 per gallon. Over on the ethanol side, corn is trading at $3.63 per bushel, which translates into $1.29 per gallon, while the ethanol contract in Chicago is trading at $1.53.

Caveats when looking at the crack and crush spreads: a primer

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Accordingly, ethanol producers have worked hard on diversifying the product set, notably adding corn oil in recent years, while biodiesel producers have sought out alternative feedstocks, especially tallows and other waste fats, oils and greases. Choice white grease in the Central US, for example, is trading at 21 cents per pound, or 20% less than soybean oil.

RIN price trajectories

(For those newer to the sector: RINS add value to renewable fuel. Obligated parties must present a certain number of RINs to the EPA each year. So, they have a choice between using fossil fuels and buying RIN in the marketplace, or buying a gallon of renewable fuel that comes with a RIN attached. For that reason, if RINs cost $1.00, an obligated party should be willing to pay up to $1.00 more for a renewable fuel, per gallon to avoid having to buy a RIN in the marketplace.)

RINs have been in free-fall since the arrival of the Trump Administration, with buyers disappearing on the theory that renewable fuel volumes will fall or the RFS will be scrapped or reformed under new management.

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So, where’s the opportunity right now?

It’s in cellulosic, cellulosic, cellulosic.

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And we might add: California, California, California.

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Which leaves brown grease. That’s rich in free fatty acids and it’s a bear to work with. Only a handful of plants have the technology — but that’s where the opportunity is. Consider the potential for grease acquired from wastewater treatment facility, and waste inedible fish oils.

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The USDA has an excellent round up here.

PFL daily has a standout daily report, including RIN prices, and that’s here.  READ MORE