Historical 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 soybean oil and biodiesel prices for Iowa reported weekly by the Agricultural Marketing Service, and methanol prices reported monthly by Methanex, we have computed the biodiesel operating returns from April 13, 2007, to the present.
The graph below divides the price of biodiesel into three components: the cost of soybean oil in biodiesel, other operating costs (net of glycerin, and other 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.
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