The American Soybean Association (ASA) testified this morning in Washington, D.C., on implementation of Farm Bill Section 9005, the Bioenergy Program for Advanced Biofuels, at a U.S. Department of Agriculture (USDA) Rural Development and Rural Business-Cooperative Service public meeting. ASA urged USDA to move expeditiously to implement the Bioenergy Program, provide payments to U.S. biodiesel producers in fiscal year 2009, and ensure that payments are provided on all gallons of domestically produced biodiesel.

"To realize that future potential and meet the objectives of greater U.S. energy independence, rural economic development, and improving the environment, we need the Bioenergy Program for Advanced Biofuels to support current domestic biodiesel production," said ASA Board member Bob Henry, a soybean producer from Robinson, Kan. "The Bioenergy Program could provide the support necessary to make U.S. biodiesel more competitive and ensure that the new Renewable Fuel Standard (RFS) is filled with domestically produced biofuels."

The RFS for biomass-based diesel begins at 500 million gallons in 2009 and ramps up to 1 billion gallons in 2012. The Bioenergy Program for Advanced Biofuels provides for payments to be made to eligible producers to support and ensure an expanding production of advanced biofuels. The Act provides $55 million for FY 2009 and 2010, $85 million for FY 2011, and $105 million for FY 2012. In addition, the Act authorizes appropriated funding in the amount of $25 million for each of FY 2009–2012.

"The ASA and National Biodiesel Board worked together to actively support the inclusion of the Bioenergy Program in the Farm Bill reauthorization," Henry said "As the primary proponents of the program, we worked with Congress throughout the process in support of its inclusion in the final Farm Bill."

The U.S. biodiesel industry was in large part hatched from the work of soybean producer organizations. Soybean producers and rural communities have benefited tremendously from the new markets that have resulted from biodiesel production. While U.S. biodiesel is being produced from a diverse array of feedstocks, soybean oil is still used for up to 80 percent of U.S. biodiesel production.

"A premium is paid for soybean oil over other feedstocks because of the high quality of biodiesel it produces," Henry said. "The biodiesel market has helped to reduce the historical surplus level of soybean oil stocks and replaced the markets lost as a result of the shift away from trans fats."

A top priority for U.S. biodiesel producers is to ensure that the Bioenergy Program payments are provided on all gallons of biodiesel produced. The previous Bioenergy Program was focused, by statute, on increased or incremental production. Program or payment caps should be implemented only insofar as they are necessary due to the total program funding and the number of eligible producers that apply.

"Payments on all gallons of biodiesel produced is important to ensure competitive fairness among biodiesel producers that have maintained production during the industry’s difficult economic times," Henry said. "If the program were to focus or provide a higher level of payment on increased production, it would provide a competitive advantage to new producers or those that re-start after having suspended production. Those who have maintained their biodiesel production should not be punished or put at a competitive disadvantage."

The Bioenergy Program is needed to help make U.S. biodiesel more competitive against subsidized imports from countries that lack intellectual property enforcement.

"Argentina uses Differential Export Taxes (DETs) as an export subsidy that has artificially lowers the costs of finished biodiesel versus soybean oil," Henry said. "In the past year Argentina raised their export tax on soyoil from 24 percent to 32 percent, while the export tax on soy based biodiesel was left at 5 percent, with a 2.5 percent tax credit."

According to a report on the sector by USDA, Argentina is expected to quadruple their production in 2008, and by the end of the decade will be making 10 times the amount it produced in 2007. Argentina’s use of DETs provides an effective export subsidy to its biodiesel exports and this has contributed to the tremendous expansion of Argentine biodiesel capacity, production and exports that is underway.

"Seed piracy and lack of intellectual property enforcement has also allowed Argentine producers to utilize seed technologies for free while U.S. farmers are paying for these very same technologies," Henry said. "This allows Argentine soybeans and soybean oil to be produced and marketed at an artificially low cost."

For example, U.S. soybean producers paid approximately $15 per unit in royalty for Roundup ReadyÒ soybean seed. At an average of 1.2 units/acre this would translate into a $18 per acre artificial advantage for Argentine soy production over U.S. production owing to seed piracy and the Argentine government’s lack of intellectual property enforcement. At an average of 42 bushels per acre, that translates into a 43 cent per bushel or $15.75 per metric ton price artificial production cost advantage for Argentine soybeans.

"In the absence of tariff protection at the U.S. border, it is possible that foreign produced biodiesel could displace domestic biodiesel in our own market," Henry said. "The Bioenergy Program for Advanced Biofuels should be used to help protect and encourage domestic biodiesel production."