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Soybean farmers trying to save an industry: Biodiesel

Agriculture.com Staff 12/11/2009 @ 3:02pm

Sidney, Ohio, farmer Rob Joslin has been president of the American Soybean Association only about a week and already he's got a giant headache.

It's the biodiesel tax credit of $1 a gallon. It expires at the end of this month unless Congress votes to extend it. That means time is running out for an industry that has a measurable effect on soybean prices.

"We're very concerned if it will get movement in the Senate," Joslin told delegates to the Iowa Soybean Association annual policy meeting in Ankeny, Iowa, Thursday.

ASA plans to fly members to Washington to convince senators that they need to act soon, said Joslin, one of the few out-of-state speakers who managed to get through one of Iowa's worst blizzards to attend the meeting.

Biodiesel demand adds about 25¢ to the value of a bushel of soybeans, Joslin explained to Agriculture Online later. "That's over $6,000 on my farm," he said.

It also provides a market for soybean oil, one that has been shrinking as processors switch to other vegetable oils that do not add transfatty acids to foods. In recent years soy oil use has dropped by about 3 billion pounds, he said.

"We need to look for ways to regain that in the human sector, but until then, we need to protect our biodiesel industry," he said.

The industry is already struggling, hurt by low fuel prices that are one factor in low demand for biodiesel. Yet the value of its raw material, soybean oil, is relatively high at $3.01 per gallon over the past two and a half years, according to a study by economist John Urbanchuk that was released this month by the National Biodiesel Board. Crude oil used to make conventional diesel fuel has averaged $1.82 a gallon.

The industry is already struggling, operating at only about 15% capacity. Without the $1 tax credit that helps make up for the cost difference between crude oil and soybean oil, Urbanchuk predicts the industry will shut down.

"They're operating on tight margins," Joslin said. "Once it shuts down, I'm very concerned it will be a long time before those production plants start back up."

There was some good news for the industry this week.

The House of Representatives passed a tax extender bill that includes the biodiesel tax credit, giving it life for another year, until December 31, 2010.

And, Senator Tom Harkin (D-IA) wrote the leaders of the Senate Finance Committee, Chairman Max Baucus of Montana and ranking Republican, Chuck Grassley of Iowa, urging them to prepare legislation to extend the tax credit.

Without it, "these plants are within weeks of needing to shut down operations and lay off their hundreds of employees," Harkin said.

But it may be too little, too late. As everyone knows, the Senate is preoccupied with health care legislation. Harkin has predicted that the vote on a final health care bill could be as late has the day before Christmas.

Joslin told Agriculture Online that even if the Senate passes a tax extender bill with the biodiesel credit, its bill and the House bill will still have to be combined in a conference committee, then sent to another vote in both chambers, before being sent to President Barack Obama for his signature. And it needs to happen before Congress adjourns for the holiday recess.

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