Demand for soybean oil set to explode

ST. LOUIS – The formation of unlikely partnerships and the expansion of renewable diesel production is expected to trigger strong demand for US soybeans.

An overview of soybean demand and potential in the coming years was presented in a webinar hosted by the US Soybean Export Council.

“There is a lot of exciting work going on within the American soybean family and the American soybean industry, thinking about how soy can be used. There are a lot of new uses that you might read. And how can we educate people about the great things soy can do for them? There is a lot of energy and enthusiasm in this area and we look forward to working with US soybean customers around the world, ”said Jim Sutter, CEO of USSEC.

“Changes in renewables and biofuels, an increase in demand for sustainable aviation fuels, these are influencing supply and demand. “

– Jim Sutter, CEO of the US Soybean Export Council

“Markets are constantly changing in the United States and around the world, and things are changing within the global vegetable oil complex and the global protein complex. Changes in renewable energies and biofuels, an increase in demand for sustainable aviation fuels, these elements influence supply and demand. “

Larger market

Mac Marshall, vice president of business intelligence for USSEC and the United Soybean Board, said about 3 billion gallons of biodiesel are currently produced in the United States, but with recent announcements of renewable diesel, l hydrotreated vegetable oil, a much larger market is expected. in the future.

“Recent announcements in terms of new installed capacity or potential construction of green fields can significantly increase this market over the next two years. It all hinges on building all of these announced factories, which will remain to be seen, ”Marshall said.

Many of the proposed renewable diesel plants are located around coastal facilities in California, Louisiana, and the Pacific Northwest.

Renewable diesel and biodiesel use the same feedstocks as soybean oil, distillery corn oil, animal fat, canola oil, and used cooking oil or yellow fat, including soybean oil accounts for almost 50% of the share of raw materials.

The current biodiesel capacity is 2.428 billion gallons and the renewable diesel capacity is 971 million gallons for a total capacity of 3.399 billion gallons. If the proposed expansions through 2024 and beyond materialize, renewable diesel capacity would reach 3.221 billion gallons, bringing the total capacity of biodiesel and renewable diesel to 5.976 billion gallons.

“Just because this capacity is put on-line doesn’t mean it will be the total amount of gallons produced or, by extension, the complete draw of the feedstock,” said Marshall.

There was enthusiasm in early 2021 with the announcement of more processing plants in the renewable diesel field. Optimism has grown increasingly with the unusual partnerships between the energy space based on petroleum fossil fuels and the world of crushing oilseed processing.

“You have examples of a combination of Loves and Cargill or Marathon Petroleum and Archer Daniels Midland or Phillips 66 and a joint venture with Shell Rock soybean processing in Iowa for the full harvest of all soybean oil that would be produced from this facility, ”noted Marshall.

“In September, Chevron and Bunge announced a large joint venture in which they would look to double the capacity of Bunge’s processing plants in Destrehan, Louisiana and Cairo, Ill. By the end of 2024. Bunge would bring these facilities and Chevron would effectively inject capital for the expansion to the tune of $ 600 million.

“When you see a lot of that renewable diesel capacity and the ads online, a lot of the policy-based ones, I think it’s very exciting, but when you start to see some of this private sector investment happening and especially these rare partnerships between really different industries is what makes it so much more tangible, real and exciting. When we see this new crush come online, it will definitely be good for the soy industry as a whole.

Marshall turned his attention to international buyers of US soybeans, noting that there would still be plenty in the export chain, even with the increased demand for renewable diesel production.

The planned expansion of grinding would represent an increase in demand of about 20% for all petroleum raw materials.

“We will always have large quantities of whole soybeans available for international markets,” added Marshall.

Policy oriented

The success of the renewable fuels industry depends on federal and state policies.

The renewable fuels standard guides national policy, and the RFS sets the stage for the United States Environmental Protection Agency to develop new renewable fuel obligations each year to guide the market.

Alexa Combelic, director of government affairs for the American Soybean Association, noted that these revolving volume bonds have been delayed for the past three years. However, she is optimistic about the numbers for the coming year.

When it comes to state policy, several states have carbon targets that lead to sustainable policy. Combelic spotlighted California, which initiated this process in 2009 as the first state to implement a low-carbon fuel standard. This was followed in 2016 by Oregon, and Washington is close to completing the process of developing low carbon rules.

Beyond RFS

James Fry, founder / president of LMC International, said states’ policies have shifted from reliance on RFS mandates to legal requirements to reduce the carbon intensity of their fuels.

Fry noted that traditional biodiesel and fuel ethanol have faced blending walls in the proportions in which they can be blended with diesel and gasoline.

“These blending walls mean that a higher demand for biofuels must increasingly be met with renewable diesel, the only biofuel that has no limits on the proportions in which it can be blended,” said Fry, adding that California has the greatest reliance on renewable diesel where biodiesel blending rates already exceed 20%.

A new market is on the horizon in the form of sustainable aviation fuel.

While this is still new, Fry reports that some analysts believe it will be bigger than traditional biodiesel and renewable diesel in 10 years, but could use ethanol as an input, not oils and oils. fats.

Looking ahead, Fry believes there will be seasonal pressure on the availability of soybean oil from US crushers.

“Soybean oil is truly the ideal oil to meet the California and RFS mandates,” Fry said.

More acres

To meet this demand, Fry expects US soybean producers to increase soybean production from 7 to 8 million acres, bringing the total acres to 94 to 95 million by 2030-2031.

This expansion, he added, will likely take hectares away from corn, wheat and cotton, and he also expects seed companies to develop soybeans with higher yields and higher oil content. .

The production of more soybeans will be accompanied by an increase in US crushing, with much of the investment in new capacity already underway with renewable diesel.

Fry predicts that for the next five years, the growth in US production will roughly match the growth in grinding. It is only after 2027, when the growth of sustainable aviation fuel becomes crucial, that export surplus beans could be absorbed domestically by an explosion in demand.

One thing is certain, Fry noted, increased crushing in the United States will lead to increased production of soybean meal. Some of these will be used to feed livestock, leading to increased meat exports, and others will be for new vegetarian and vegan foods. However, most of it will be exported.

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Felix J. Dixon