Recent years have seen an unprecedented global increase in the production and use of
biofuels. This has been driven primarily by government support for biofuel industries.
Soybeans are the only field crop produced in sufficient quantities in the province of KwaZulu-
Natal (KZN) that the South African (SA) industrial biofuel strategy identifies as a potential
biodiesel feedstock. Thus, this study is an evaluation of the economic feasibility of producing
biodiesel on farms from soybeans in the main soybean-producing regions of KZN, using
batch processing biodiesel plants. A mixed integer linear programming model was developed
to simulate observed agricultural land rental rates (estimated at 4.48% of the market value of
land) and cropping behaviour of commercial crop farms in the study regions. The model
incorporates various alternative crops, crop rotations, tillage techniques, arable land
categories and variance-covariance matrices to account for risk in production. All data are
on a real 2009/10 basis.
The model is used to predict possible farmer investment behaviour and determine the
minimum biodiesel subsidy required to stimulate soybean-based biodiesel production in the
study areas. Results suggest that biodiesel production is currently not an economically viable
alternative to fossil fuel, and that the incentives and commitments outlined by the current
industrial biofuel strategy are inadequate to both establish and sustain a domestic biodiesel
industry. Under baseline assumptions, a realistic minimum implicit subsidy of R4.37 per litre
of biodiesel is required to draw soybean-based biodiesel production into the optimum
solution for commercial farms.
The economic feasibility of on-farm biodiesel production is highly dependent on the soybean
price (i.e., the feedstock input cost) and the soybean oilcake price (i.e., the highest valued byproduct).
Thus, future promotion of biodiesel ventures could primarily target a reduction of
feedstock costs through the development of new technologies which increase yields of
available feedstocks and/or permit the use of lower cost alternatives. Higher subsidy levels
are anticipated for: (i) small-scale initiatives (particularly in the absence of a rental market
for cropland); (ii) soybean-based biodiesel production in areas with less suitable growing
conditions for cultivating soybeans; and (iii) using sunflower and/or canola as biodiesel
feedstock. To the author’s knowledge no other previous studies have attempted to quantify the
minimum level of support needed to stimulate biodiesel production in South Africa.
The SA industrial biofuels strategy promotes a development-oriented strategy with feedstock
produced by smallholders and processed by traditional producer-owned cooperatives.
However, traditional cooperatives suffer from a myriad of institutional problems that are
associated with ill-defined property rights. As such, it is argued that these initiatives will fail
to attract the capital and expertise needed to process biodiesel. This research, therefore,
highlights the need for South Africa’s current Cooperatives Act to be amended. Accordingly,
this also infers a need to revise the proposed SA industrial biofuels strategy. It is concluded
that smallholder participation in biodiesel ventures would require a rental market for
cropland, co-ownership of the processing plant in a non-traditional cooperative or investor-owned
firm, information and training, and a high level of government subsidy.
This research advocates that government consider promoting soybean oil extrusion ventures
as a means of stimulating rural development for small-scale farming initiatives rather than
soybean-based biodiesel production, as they will likely require less government assistance,
whilst potentially combating the food versus fuel debate against biofuels. This is compounded
by the fact that South Africa has historically been a net importer of both soybean oilcake and
soybean oil. Importantly, however, the proliferation of such initiatives should not be based on
the current notion of traditional cooperatives. The need for government to play a proactive
role in such ventures through facilitating the development of appropriate business models
which stimulate private investment in feedstock and processing facilities is clearly evident. / Thesis (M.Sc.Agric.)-University of KwaZulu-Natal, Pietermaritzburg, 2010.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:ukzn/oai:http://researchspace.ukzn.ac.za:10413/8543 |
| Date | January 2010 |
| Creators | Sparks, Garreth David. |
| Contributors | Ortmann, Gerald F. |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | English |
| Type | Thesis |
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