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BiorenewablesProjected Biodiesel Operating Margins
CARD is tracking biodiesel returns over operating costs based on a typical continuous flow plant that uses soybean oil as feedstock for biodiesel production. In the returns calculations, we assume that 7.6 pounds of soybean oil are needed to produce a gallon of biodiesel and 1.04 pounds of glycerin as the main co-product. Other operating costs include methanol as their main component. Given futures prices for contracts for heating oil from the New York Mercantile Exchange, we project biodiesel monthly wholesale diesel prices in the Midwest based on their historical relationship. Wholesale biodiesel prices in the Midwest are then estimated by adding the average wedge between diesel and biodiesel) for the last 12 months period to the projected diesel price. Given the estimated biodiesel and soybean oil futures prices from the Chicago Board of Trade, we have computed biodiesel operating margins over the next several months.
The graph below divides the price of biodiesel into three components: the cost of soybean oil, other operating costs (net of co-products), and the biodiesel operating returns. A positive operating return does not necessarily imply profits as other costs, such as plant financing, and returns to capital, must be taken into account, but a positive operating return does signal the potential for profits in the industry. The horizontal line (at $0.12 per gallon) aims to represent the costs of capital. Profits are implied under the current set of assumptions when operating returns exceed the horizontal line.
Last update: 10/30/2009
| Month | Heating Oil Futures ($/gallon) | Soybean Oil Futures (ยข/pound) | Projected Biodesiel Prices ($/gallon) |
| November, 2009 | 1.981 | 35.685 | 3.48 |
| December, 2009 | 2.005 | 36.4 | 3.51 |
| January, 2010 | 2.038 | 36.86 | 3.55 |
| February, 2010 | 2.064 | 3.58 | |
| March, 2010 | 2.078 | 37.16 | 3.59 |
| April, 2010 | 2.083 | 3.68 | |
| May, 2010 | 2.089 | 37.42 | 3.69 |
| June, 2010 | 2.099 | 3.7 | |
| July, 2010 | 2.117 | 37.67 | 3.72 |
| August, 2010 | 2.141 | 37.76 | 3.75 |
| September, 2010 | 2.166 | 37.85 | 3.78 |
| October, 2010 | 2.189 | 37.9 | 3.8 |
| November, 2010 | 2.212 | 3.74 |
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