Demand for soybean oil set to explode – AgriNews

ST. LOUIS – The formation of unlikely partnerships and the expansion of renewable diesel production are expected to drive strong demand for U.S. 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 soybeans can be used. There are many new uses that you may read about. And how can we educate people about the great things soy can do for them? There is a lot of energy and excitement 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 things 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 renewables and biofuels, an increase in demand for sustainable aviation fuels, those things are influencing supply and demand.

bigger 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 about renewable diesel and hydrotreated vegetable oil, a much larger market is expected. in the future.

“Recent announcements in terms of new installed capacity or potential new land construction may drive this market up significantly over the next couple of years. It all depends on all of these announced factories being built, 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 of soybean oil, distillers corn oil, animal fats, canola oil and used cooking oil or yellow grease, which soybean oil represents almost 50% of the share of raw materials.

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

“Just because that capacity comes online doesn’t mean it’s going to match the total amount of gallons produced or, by extension, the total amount of raw materials that will go there,” Marshall said.

There was excitement in early 2021 with announcements of new processing plants entering the renewable diesel space. Optimism has grown increasingly with the uncommon partnerships between the petroleum-based fossil fuel energy space and the rush world of oilseed processing.

“You have examples of Loves and Cargill coming together or Marathon Petroleum and Archer Daniels Midland or Phillips 66 and a joint venture with Shell Rock Soy Processing in Iowa for the complete extraction of all the soybean oil that would be produced at from this facility,” Marshall noted.

“In September, Chevron and Bunge announced a major joint venture in which they would seek to double the capacity of Bunge’s processing plants in Destrehan, Louisiana, and Cairo, Illinois, by the end of 2024. Bunge would contribute to those facilities and Chevron would actually inject it with capital for the expansion to the tune of $600 million.

“When you see a lot of this renewable diesel capacity and the announcements that are coming online, a lot of it is policy-based, I think that’s very exciting, but when you start to see a part of this private sector investment coming in and especially these uncommon partnerships between really different industries is what makes this so much more tangible and real and exciting When we see this new crush coming online it will be certainly beneficial to the soybean industry as a whole.”

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

The planned expansion of crushing would represent an increase in demand of about 20% for all petroleum feedstocks.

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

Policy-driven

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 U.S. Environmental Protection Agency to develop new renewable fuels requirements each year to guide the market.

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

In terms of state policy, several states have carbon targets that guide sustainable policy. Combelic highlighted California, which started 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 low-carbon rulemaking process.

Beyond RFS

James Fry, Founder/Chairman of LMC International, said state policies have shifted from reliance on RFS mandates to legal requirements to reduce carbon intensity in their fuels.

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

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

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

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

Looking to the future, Fry thinks there will be seasonal pressure on the availability of soybean oil from US crushers.

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

More acres

To meet this demand, Fry expects U.S. soybean farmers to increase soybean production by 7 to 8 million acres, bringing total acres to 94 to 95 million by 2030-31.

This expansion, he added, will likely remove acres of 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 crushing in the United States, with much of the investment in new capacity already underway with renewable diesel.

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

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

Steve R. Hansen