The Profitability of Biodiesel Chain with Different Organizations

The dir 30/2003 by fixing the 5,75% target of biofuel incorporation to fossil fuel for vehicles for 2010 has increased the interest for a further development of the agro-energies in the EU and generated a virtuous competition among the Member States. Purpose of this paper is to analyze the dimension and profitability of the integrated biodiesel chain with different organizations to analyze their effectiveness in different industrial organization contest. Possible improvement of the economic performance is related with the constitution of local biofuel districts where cluster of farms producing oil seed are integrated with processors to reduce production-processing transport costs : evidences of the last 15 years suggest a decline up to 20% in current €. The optimal size of plants with an higher level of exploitation of their capacity within an integrated organization is an important part of the cost-reducing process. This paper examines the theoretical plant size rules for a conventional processing business integrated in producer/processing enterprise, based on different form of integration and the spatial dimension of the oilseed input market is examined for its consequences for the scale economies of biodiesel processing facilities. The analysis drives to the following conclusions: i) the optimal size may grow further but the constrain is given by the supply of feedstock at farm level; ii) investment profitability measured with the return on capital is convenient if the dimension of the supply area is appropriate to the processing capacity of the plant; iii) the integrated cooperative network is improved to gain efficiency by reducing transaction costs; iv) the total producer plus processor profits and sharing among partners change with the type of organization used in the integrated chain.