Biodiesel Prices and Profits…Again

In a previous farmdoc daily article (November 13, 2023), we showed that the behavior of FAME biodiesel prices reported by the Agricultural Marketing Service (AMS) of the USDA changed dramatically starting in August 2021. Before this date, the AMS price and an industry benchmark price provided by OPIS differed, on average, by only a few cents and were extremely highly correlated. Beginning in August 2021, AMS prices began to lag far behind OPIS prices, with the difference reaching over $1.50 per gallon at times. Substituting OPIS prices for the AMS prices flipped the average biodiesel profitability estimate for the renewable diesel boom years (2021-2023) from strongly negative to positive. However, the use of OPIS biodiesel prices in the analysis may be problematic because the OPIS prices represent wholesale transactions in Chicago rather than at Iowa biodiesel plants. In addition, recent reports of planned shutdowns of FAME biodiesel plants (Kotrba, 2024a,b) due to “poor market conditions” indicates that profitability may not have been as strong as suggested in the November 13th article. The purpose of today’s article is to investigate the profitability of FAME biodiesel production using a plant price collected by Fastmarkets, another price reporting service. We also consider adjustments to production costs for biodiesel plants to represent changes more accurately through time. This is the 17th in a series of farmdoc daily articles on the renewable diesel boom (see the complete list of articles here).