Growth of US Biofuels Heightens Demand for Soybean Oil

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The ongoing expansion of US biofuel production continues to have cascading effects on the agricultural value chain, as supply aims to keep up with growing demand. Demand for renewable diesel feedstock has compounded historic vegetable oil inflation. 

Soybean oil prices are at 12-year highs, with the increase in price outpacing that of soybean meal. As a result, soybean oil share — the contribution of soybean oil value to the total margin from crushed soybean — has risen to 40%-45% as compared with recent averages of 30%-35%, the US Soybean Export Council reports. 

And in the coming two years, US production of vegetable-oil-based biofuels is expected to expand even further, increasing pressure on domestic and international stocks of vegetable oil. According to analyst estimates, US production of renewable diesel in particular is slated to almost quadruple from 2020 to 2022, going from approximately 550 million gallons (1.6 billion tonnes) to 2 billion gallons. Production in 2021 is projected to be 750 million gallons.

About 60%-70% of US vegetable-oil-based biofuels are currently generated from soybean oil. Assuming this proportion stays constant, over 3 million tonnes of soybean oil will have to be added to renewable diesel feedstock by 2022. 

Domestic production of soybean oil in 2020 was about 11.57 million tonnes. This came from a little more than half of total US production of soybeans — 112.5 million tonnes (4 billion bushels). About 3.9 million tonnes of domestically produced soybean oil was processed into biofuels, and another 1 million tonnes were exported. 

Future biofuel feedstock needs will therefore drive up US vegetable oil imports and domestic oilseed production and processing capacity. Recent news reports have focused on several million-dollar investments toward ramping up domestic vegetable oil processing capacity. 

These upcoming vegetable oil processing facilities and renewable diesel plants will have localized and broader-scale impact on farmers. Crushing plants produce both soybean meal and oil, and those plants with easy access to renewable diesel plants may contribute more soybean meal to the livestock industry, as they aim to meet demand from the biofuel plants. And markets for soybeans and other oilseeds, alongside higher prices, will also factor into farmers’ planting decisions. Last month’s cyberattack on the Colonial Pipeline has highlighted the potential of biofuels to ease dependence on crude oil, in turn raising questions about how the growth in renewable diesel capacity will shift the agricultural sector. 

This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.

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