PEP Review 2007-11
Feedstock Price Issues for Bio-Derived Materials
Published: December 2007
With the tremendous growth of bio-derived materials such as biofuels and biopolymers, feedstock price issues have developed. While renewable feedstocks are renewed every year, their supply is not unlimited. Rising feedstock costs have had an effect on margins for bio-derived materials and also limited their ability to compete with fossil-based materials, even in an environment of rising oil prices. Production of bio-derived industrial products has also become competitive with human and animal food production. The food and energy economies, historically separate, are now beginning to merge. In this new economy, if the fuel value of a crop exceeds its food value, the market will move into the energy economy. This may be good for farmers, but it instills a food versus fuel debate among consumers and creates economic challenges for producers of industrial bioproducts.
Corn is an important crop in the United States that serves as feedstock for producing fuel ethanol as well as biopolymers. For nearly a ten year period through the late 1990s and early 2000s, corn prices were very stable making it an attractive feedstock. Driven by ethanol production, corn prices jumped approximately 50% during 2006 and continued to rise early in 2007. Driven by biodiesel production, natural oil prices, such as soybean oil, also experienced significant gains during the same time frame. The significant price increase of these agricultural commodities has raised concern over their viability as feedstocks for industrial products.
Two possible solutions are under development. One solution is the biorefinery concept utilizing biomass as feedstock. Biomass includes a wide range of lignocellulosics including crop residues and wood wastes, which are all very difficult to process. Lignocellulosic conversion technology has been under development for years, but in 2007 the Department of Energy helped fund six commercial scale plants that should finally make biomass feedstocks a commercial reality. A second, longer term solution is using algae to produce biofuels and other bio-derived products. Microalgae can potentially be developed to make biocrude, the renewable equivalent of petroleum, and refined to make gasoline, diesel, jet fuel and chemical feedstocks. Also, the organisms are capable of producing much larger quantities of oil per unit of land than terrestrial crops.