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Surging US Biofuel Production Stokes Soybean Crush Demand

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US renewable diesel production capacity has doubled since the start of 2022, driving soybean crushing margins to a new record and pushing soybean oil futures prices to historically high levels. 

Renewable diesel capacity topped 2 billion gallons per year as of August, the latest data to be released from the US Energy Information Administration (EIA). The EIA projects capacity could more than double again to 5 billion gallons by 2025 if all projects currently being planned come online. 

Refiners are pushing the accelerator on new projects, including a 470 million-gallon-per-year renewable diesel expansion in Port Arthur, Texas. The project, a joint venture of Valero with Diamond Green Diesel, is now starting operations, over six months ahead of the original schedule.

Renewable diesel has become the fastest growing biofuel in the US. Unlike biodiesel, renewable diesel does not need to be blended with regular diesel before being used in an engine. It also garners more advantageous tax credits than biodiesel, including those under the Low Carbon Fuel Standard (LCFS) in California, where the bulk of renewable diesel is currently consumed. 

Soybean oil represents the primary feedstock in renewable diesel in the US, although cooking oil, animal fats, and other vegetable oils also are used. Some 46% of the soybean oil produced in the US is projected to go into making renewable diesel and other biofuels in 2022/23, up from 42% last year, as shown in this Gro display of crushing industry data. As renewable diesel production capacity continues to grow apace, its share of total soybean oil demand will increase as well. 

Renewable diesel’s heightened demand for soybean oil has helped drive prices and spurred greater soybean crushing activity. The spot soybean oil futures contract, while down from an all-time record in the spring, is still far above historical levels. 

Monthly soybean crushing volumes have been around the strongest in history over the past year — and are forecast to reach an all-time annual high for 2022/23. Propelling the high volumes are robust crush margins — essentially the difference between the cost of inputs (i.e, soybeans) and revenues from product outputs, mainly soybean oil and soybean meal, which is used largely in animal feed. 

Currently, the futures board crush margin is at historically high levels of around $3 per bushel. Soybean oil demand has been a significant driver of crush rates, as the soybean oil share — the percentage of crush output value represented by soybean oil — is near the top of its historical range at close to 48%. 

Gro users accessing our platform using Gro’s Excel add-in can calculate data series such as crush margins and soybean oil share to help monitor the increased demand on refiners as a result of ongoing renewable diesel expansion. For a demo of Gro’s Excel add-in, contact our sales team.

Growing demand for soybeans to produce renewable diesel escalates a competition with food uses of the oilseeds, both directly for human consumption or as feedstock for animal proteins, as Gro wrote about here. That will continue to lend support to prices of soybeans and soybean products, which in turn could encourage farmers to favor planting soybeans over other food crops, such as corn and wheat.

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