Louis Dreyfus has officially opened a $150 million soybean processing and biofuel plant in Claypool, Indiana. The company claims the new unit is the largest integrated soybean-based production facility in the world. “Claypool is a strategic centerpiece for our company’s future,” said Robert Louis-Dreyfus, chairman of Louis Dreyfus Commodities. “This plant affirms our century-old practice as a market innovator. We are grateful to be a partner with the State of Indiana and the local community in this new venture.”

The facility includes an 88-million gallon per year biodiesel plant which will also produce 1 million tonnes of soymeal each year, utilizing 50 million bushels of soybeans, more than 17% of the soybeans grown in Indiana. Kip Tom, a board member of the Indiana Economic Development Corporation, said that in a single year, the plant will buy more than $450 million worth of soybeans produced by Indiana farmers.

This is the first entry into the biodiesel field for Louis Dreyfus, a French company that has been trading in grains internationally for 150 years and has been operating in the United States for almost a century. The plant, located in north central Indiana, is planning to start to crush soybeans in late September and begin biodiesel operations in early October.

Growth in planned projects and those currently under construction in the United States remains strong for both ethanol and biodiesel plants, according to Soyatech’s Biofuels Index, newly updated for second quarter (Q2) of 2007. However, the data also shows signs that the maize-based ethanol construction boom may be leveling off somewhat. Soyatech’s Biofuels Index, which tracks planned and actual build-out of biofuels production capacity, points to a slight leveling off in construction of ethanol plants during Q2 2007 - the first time since the Index began tracking these numbers. According to the Index, capacity under construction decreased slightly by 1.7%.

“While the percent change is too small and the time frame too short to identify this as a definitive trend, we understand from industry sources that it is more difficult to secure debt financing for new refineries due largely to increased equity requirements on the part of banks providing this funding. We suspect that an additional cause may be constraints on the amount of corn available as a feedstock to produce ethanol,” said Jacob Golbitz, director of research for Soyatech.

Total online capacity for biodiesel production increased sharply - 41% from the first quarter (Q1) to Q2 2007, from 890 million gallons per year (mpy) to 1.255 billion gallons per year (bgy). “While it is easier to produce impressive growth when starting from a smaller base, a 41% growth rate nevertheless means that industry capacity for biodiesel nearly doubled over the last three months. That is certainly a significant development,” said Golbitz. Biodiesel capacity under construction for the same period grew by 19%, from 1.613 bgy to 1.927 bgy, and planned capacity rose even further by 24%, from 2.331 bgy to 2.898 bgy.

Golbitz noted that one factor contributing to the strong showing for biodiesel is optimism that the $1 per gallon federal subsidy for biodiesel will be extended with the passage of the 2007 Farm Bill later this year.

The Index summary also discusses issues surrounding feedstock availability, noting a movement away from reliance only on soybean oil and towards the use of alternative feedstocks in the capacity build-out of biodiesel plants. According to the Index, only 39% of capacity currently under construction, and just 16% of planned capacity, indicates soybean oil as the sole feedstock. “Given the development of trends that we have observed over the last six months, we expect convergence in the price of all commodity fats and oils over the next 6 to 12 months that will leave little to no additional margin for biodiesel producers that use alternative sources,” Golbitz noted.

Oilseed and grain prices are in for a two-year price spike on the back of tight markets, the Economist Intelligence Unit (EIU) is predicting. The EIU food, feedstuffs and beverages index is on course for a 16% rise this year, echoing its performance in 2006, according to the latest forecast. The outlook is for further annual growth of 2% in 2008 and 2009, suggesting that the commodities boom has some way to run. “Surging demand for food, feed and fuels is combining with low stock levels to create extremely tight markets,” the EIU writes. “Unfavorable weather conditions, combined with competition for acreage, imply that it will take some time still before supply manages to catch up with demand.”

Leading the way are grain and oilseeds, with expected price rises of 16% and 20% respectively this year, and 5% in both cases next year. Senior commodities editor Kona Haque argues that the ethanol and biodiesel industries are pushing up demand for corn, soybeans and palm oil, with lack of available land and poor weather preventing output from rising.

The soy complex was up on August 23. Soymeal futures largely recovered from the previous week’s collapse and soybean futures also increased, whereas soyoil futures were unchanged last week due to declines in the petroleum markets. Speculators have returned as heavy buyers of soybean and soybean meal futures amid a stabilization of the financial markets and a rebound in Brazil’s real that makes it harder to buy soybean acres in Brazil. In the United States, concerns that too much rain in the northern parts of the Corn Belt and a lack rain in the southern Corn Belt and the Delta are undermining the soybean crop and providing support, especially after USDA’s condition ratings dropped unexpectedly. While the market has to contend with a record large 2006-07 carryout, stocks look to significantly tighten in 2007-08 and have to the potential to be intolerably tight in 2008-09. This assumes an 11% Brazilian area increase and a 2008 U.S. yield that the market is skeptical of attaining. As such, soybean and soybean meal futures should have considerably more upside potential than downside risk unless the U.S. soybean crop is able to top USDA’s August yield of 41.5 bushels per acre. September bean futures closed up $3.95, finishing at $309.38; November gained $4.13, closing at $315.30; and January was up $4.23, ending at $320.86. September meal increased $3.42 closing at $256.06; October was $3.31 higher, finishing at $259.26; and December meal gained $3.31 to close at $264.11. September oil closed $1.98 higher to finish at $778.00; October was up $0.44, closing at $782.63; and October gained $3.53, closing at $793.22.

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