WINNIPEG/NEW YORK, Feb 25 (Reuters) - Archer Daniels Midland , one of the world’s top biofuels producers, has slowed North American biodiesel output, the latest sign the industry is battling uncertainty over U.S. renewable fuel policy while the oil rout curbs demand.
The Chicago-based agri business has “temporarily” shifted production at its Velva, North Dakota, oilseeds processing facility from biodiesel to other products and cut production at its other North American facilities, ADM spokeswoman Jackie Anderson said in an emailed statement.
“We will continue to evaluate the market, and look forward to resuming production when conditions improve,” she said.
With 140 million gallons of annual capacity at its wholly-owned Velva site and two joint ventures in Missouri, ADM is a sizeable player in the 2-billion gallon U.S. industry.
It also runs a plant with 70 million gallons of capacity in Lloydminster, Canada.
The ADM spokeswoman declined to give the timing and size of the cutbacks. The Northern Canola Growers Association said the switch in North Dakota took place a few months ago.
The move is a sign of the “strain” being felt across the industry after a year-long drop in biodiesel prices and oil’s second-worst rout in history, said Steve Nicholson, an analyst with Rabobank AgriFinance in St. Louis, Mo.
“There’s no question we’ll see idling of plants and we may see consolidation or people getting out altogether,” he said.
Late last year, diesel’s discount to B99/B100 biodiesel was at its widest since 2011, according to the latest data from the U.S. Department of Energy.
Other major U.S. producers include Renewable Energy Group Inc. and Cargill Inc., but the industry also has many small, independent players.
Uncertainty over decade-old federal policy aimed at energy independence and cutting carbon emissions has added to the industry’s woes.
The U.S. Environmental Protection Agency, which implements the Renewable Fuels Standard program has not yet set biofuel blending requirements for last year, 2015, and 2016.
A $1-per-gallon tax credit expired in December.
Biodiesel producers represent a sliver of the 17 billion-gallon U.S. renewable fuels market, but they are not alone: ethanol makers, which produce a corn-based fuel, are also feeling the crunch. A Reuters analysis showed average ethanol margins are at their lowest levels since 2005. (Additional reporting by Tom Polansek in Chicago; Editing by Grant McCool)