U.S. biofuels mandate proposals could push soybean oil prices up

The Environmental Protection Agency (EPA) on Tuesday night proposed to reduce US biofuel blending requirements for 2020 and 2021. But its most important proposal could be to increase blending quotas in 2022 for diesel-based. biomass and advanced biofuels, measures that would increase soybean demand and prices. and other edible oils.

With soybean oil being one of the most consumed vegetable oils, the EPA’s proposal could increase competition for edible oils and also spark a new round of debate over food policy against fuel in an era of increased food inflation in the United States.

Under the EPA’s Renewable Fuels (RFS) standard, advanced biofuels include biomass-based diesel and ethanol produced from sugar cane. Biomass-based diesel is primarily composed of biodiesel, renewable diesel, and renewable jet fuel.

For 2022, the EPA’s new proposal increased the biomass-based diesel blend to 2.76 billion gallons, 14% from 2019 and 2020 levels. According to the proposal, advanced biofuels are expected to reach 5, 77 billion gallons next year, up almost 11% from 2020 and 25% from 2019 levels.

As renewable diesel capacity continues to be developed in the United States, the portion of advanced biofuel that is not made from biodiesel will likely be renewable diesel. This means that the demand for soybean oil and other raw materials for edible oils and fats will increase, likely leading to a tightening of the global vegetable oil balance.

It also suggests that current soybean crushing volumes in the United States would be insufficient to meet the demand for petroleum generated by the increasing renewable diesel needs, meaning that crushing rates are expected to increase over the next several years or so. that alternative raw materials should be found. Check out Gro’s American Soybean Grinding Model to monitor daily grinding availability.

The EPA’s 15 billion gallon blending quota in 2022 for conventional biofuels means the United States will need to procure an additional 580 million bushels of corn to produce the increase of 1.68 billion gallons of ethanol next year, according to Gro’s calculations. This in turn will spark additional demand for corn and support futures contracts through 2022, unless the proposed volumes are revised.

Under the proposed RFS, the total renewable fuel blend for 2020 has been reduced by 14.7% to 17.13 billion gallons from the previously set requirement of 20.09 billion gallons. The ethanol blend was then reduced by 16.6% to 12.5 billion gallons, as the EPA essentially matched the actual blend volumes for that year. Similar changes were made to advanced levels of biofuels, with the 2020 mandate reduced to 4.63 billion gallons from 5.04 billion gallons.

The oil industry lobbied the EPA to lower the 2020 blending figure to more closely align with lower overall fuel consumption during the pandemic. Had the EPA not lowered its biofuel blending mandate, refiners would have had to purchase renewable fuel credits from the market to comply with the law.

For 2021, the total blend has been set at 18.52 billion gallons and the ethanol blend at 13.32 billion, which is lower than the finalized volume of 15 billion gallons in 2019.

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Felix J. Dixon