Small-scale biodiesel production: a case study of on-farm economics

In an attempt to reduce input costs, farmers have become interested in growing alternative crops for the production of biofuels such as biodiesel. Using small-scale cold presses and conversion systems to offset variable diesel fuel prices, biodiesel could be produced on-farm. For example, a farmer could grow oilseed crops such as soybeans, canola, sunflower, or peanuts (grown in the southeastern US) and either sell through traditional commodity marketing or choose to produce his/her own biodiesel. In another scenario, farmers could acquire waste vegetable oil (WVO) for biodiesel production. However, research is limited on the economics of such processes, given the variability that could occur. As has been observed in the past several years, fluctuations in commodity and petroleum fuel markets may drastically influence the economics of a small-scale, on-farm biodiesel production process. Likewise, other variables such as crop yield, seed oil content, capacity of the biodiesel production system, mechanical pressing efficiency, vegetable oil price, chemical costs for biodiesel production, and value added utilization of co-products will ultimately define the bottom line of this process. Therefore, this project was conducted with the following objectives; 1) Assess economics of a current small scale biodiesel production system in Auburn University’s Biosystems Engineering department and 2) use the data collected to develop a prediction model for a small-scale, on-farm biodiesel production system scenario. Auburn University Biosystems Engineering Department’s biodiesel production system utilizes all WVO from dining facilities on campus, totaling 3,300 gal/yr. Biodiesel is produced for approximately $2.21/gal ($0.58/L) using base catalyzed transesterification techniques and one dedicated technician. Process data from 2010 was extrapolated to an on-farm scenario with estimates made for oilseed processing techniques and yield based on previous studies. Opportunity costs of oilseeds were assessed as well as current soyhull pellet prices. Ultimately, a decision assistance tool was developed for use by farmers. This model allows farmers to input basic variables described above to aid in determining if producing biodiesel or selling crops is most profitable. Outputs of the model includ total biodiesel and meal yields, meal value, WVO transportation cost, oilseed extrusion cost, biodiesel production cost, and operating costs. Simulations indicate that in 2010 soybean biodiesel resulted in the highest cost of production which was inversely proportional to soybean acreage. Canola followed closely, but WVO was the least expensive in terms of production cost as an essentially free feedstock with only transportation and process cost added. Biodiesel production cost fluctuated with commodity market pricing. In 2010, soybean and canola biodiesel could be produced on 50-500 acres at a cost of $12.06-$6.81 and $7.22-$4.07, respectively. Five thousand gallons per year of WVO could be transesterified in this model for $1.40/gal. In 2010, Alabama farmers lost on average $101.22/ac when growing soybeans (ACES, 2011). This model revealed that by producing biodiesel with the 2010 soybean crop, farmers could have reduced losses by $10.00/ac. While this system would not give farmers strong economic advantage, it is feasible and has the potential to reduce losses. The biodiesel production system, gives farmers an alternative to selling crops through traditional commodity outlets and lowers livestock feed bills.