Renewable diesel boom is bane of bakers
Bakers are experiencing a “soybean oil supply crisis” of soaring prices and limited availability due in part to the land rush of investors into renewable diesel fuel, said an Ohio baking executive on Wednesday. Soy oil is a key ingredient in baked goods as well as the feedstock for making renewable diesel.
“Economists report that vegetable oil prices have tripled in the past 12 months and that the food sector faces rationing and shortages for the third quarter of 2021 and into 2022,” said executive Ed Cinco, testifying on behalf of the American Bakers Association (ABA), a trade group. “This means for some food companies, edible oil literally will not be available at any price due to diversion of edible oil from producing food to burning as fuel at the end of this calendar year.”
The EPA could relieve the soy oil squeeze by scaling back its mandates for the consumption of biofuels, which include renewable diesel and biodiesel, also made with soy oil, said Cinco, purchasing director for Schwebel’s Baking Co. in Youngstown, Ohio. The EPA has yet to announce biofuel targets for 2021 or 2022. The pandemic scrambled fuel consumption patterns and has made it more difficult to forecast demand.
“ABA members are reporting that because of the lack of certain ingredients, they will no longer be able to manufacture 10% to 15% of their product line … Bakers will have to make tough decisions, and this will impact American families,” said Cinco, who spoke at a House Agriculture Committee hearing on “challenges to our nation’s food supply chain.” Ingredients in short supply include gluten, emulsifiers, and soy oil, with “upcoming issues” projected for honey, sesame seeds, and durum flour, according to the baking industry.
The ethanol boom that began early this century inspired a fiery food-vs.-fuel debate because corn, the primary feedstock for ethanol makers, is a major component of livestock rations needed for meat, egg, and dairy production. Ethanol and other biofuels are popular in most of farm country as a source of jobs and agricultural income. While farm groups and biofuel makers urge the EPA to set high biofuel mandates, the oil industry perennially argues against them.
At present, one-third of U.S. soy oil production is used to make biofuels. The USDA says that could jump to 43% in the marketing year that ends Sept. 30, 2021. The Energy Department said last summer that renewable diesel production, now less than 1 billion gallons a year, could reach 5 billion gallons by 2024, based on a spate of announced or proposed projects.
House Agriculture chairman David Scott said that although supply chain disruptions were “serious and unprecedented, it is important to remember that we are not facing a scarcity of food and agricultural commodities.” There is an abundant, secure food supply, and farm exports are forecast for record highs this year, he said. Scott said a major element in supply chain disruptions was a shortage of truck drivers. The American Trucking Association said 80,000 new truck drivers are needed.
To watch a video of the hearing, click here.
To read the written testimony of witnesses, click here.