One Kernel: Two Commercialized Fuels Benefit Ethanol Margins and In Turn, Farmers

You know that Iowa’s ethanol industry can produce more than 3.6 billion gallons annually, using over 1.1 billion bushels of corn. But did you know that Iowa’s biodiesel industry also benefits directly from ethanol production? Inedible corn oil, extracted from DDGs on the back end of the ethanol process is the fastest growing, commercially-available feedstock in the U.S. biodiesel industry.


“Two commercialized renewable fuels from one kernel is an amazing technological and economic breakthrough,” said Dave Elsenbast, Vice President of Supply Chain at Renewable Energy Group, the nation’s largest biodiesel producer and marketer. “

A new study released by the Iowa Renewable Fuels Association, Iowa Corn Growers and the Iowa Soybean Association, stated Iowa corn growers earns an additional $0.33 per bushel because biodiesel producers buy inedible corn oil. Overall, Iowa biodiesel production created $1.273 billion revenue in additional revenue for Iowa row crop farmers in 2011. 

Federal Program Supportive of Growing Demand for Inedible Corn Oil 
Demand for inedible corn oil continues to strengthen as the biodiesel industry expands under the Renewable Fuels Standard (RFS2). In 2011, the biodiesel industry produced 1.1 billion gallons in a market where the requirement was 800 million gallons. The industry met their 2012 1 billion requirement and the 2013 renewable volume obligation for biodiesel is 1.28 billion gallons.

The U.S. feedstock matrix for biodiesel is quite diverse and is representative of a strong U.S. oilseed, ethanol, and livestock industry.  Compared to our early roots of soybean oil usage, the list of commercial feedstocks biodiesel companies use today are incredibly diverse: beef tallow, pork fat, poultry fat, used cooking oil, and inedible corn oil (or ICO).

“This diversity in agriculture co-products and by-products makes the U.S. biodiesel very sustainable,” added Elsenbast. “We are producing product that performs and we want Iowa corn growers to ask for biodiesel at the pump because its offering a lot back to the Iowa ag economy.”

The Right Biodiesel Technology Makes Inedible Corn Oil a Production Reality
"With expectations that 80% of ethanol plants will be extracting corn oil from their DDGs by the end of 2012 the time has come to focus on adding value to the corn oil stream," said Joe Riley, General Manager of FEC Solutions in a company press release last summer.

Biodiesel facilities with pretreatment or feedstock purification systems can “clean-up” the usually thick, red-colored inedible corn oil before converting it into fuel, explained Elsenbast. “With the right technology, we are able to remove or convert the free fatty acids with from inedible corn oil and produce product that meets and exceeds biodiesel quality specifications,” he added.

REG is a low cost biodiesel producer. We primarily produce our biodiesel from a wide variety of lower cost feedstocks, including inedible animal fat, used cooking oil and inedible corn oil. We believe our ability to process these feedstocks provides us with a cost advantage over many biodiesel producers, particularly those that rely on higher cost virgin vegetable oils, such as soybean oil. In addition, we believe our reputation as a consistent user of inedible corn oil, our large and diverse feedstock supplier base and our processing capabilities give us a competitive advantage over other biodiesel producers

Biodiesel Demand Creates Margin Opportunities for Ethanol Producers 
The growing demand for inedible corn oil from the biodiesel industry has spurred new reporting programs for daily prices. Informa’s Feed Ingredient Daily and Jacobsen both report daily inedible corn oil prices by the pound.

Last summer’s hot, dry weather has pushed corn prices up squeezing margins for ethanol producers. Those with inedible corn oil extraction technology are offered margin opportunities despite a run in prices. “Ethanol facilities with inedible corn oil being sold to biodiesel producers have an opportunity to run deeper into a tough market,” explained Elsenbast.

~By: Renewable Energy Group