ST. LOUIS — The formation of unlikely partnerships and expansion of renewable diesel production are expected to spark robust demand for U.S. soybeans.
A rundown on soybean demand and the potential in the years ahead was featured in a webinar hosted by the U.S. Soybean Export Council.
“There’s a lot of exciting work going on within the U.S. soy family and the U.S. soy industry, thinking about how soy can be utilized. There are lots of new uses that you may be reading about. And how can we be educating people about the great things that soy can do for them? There’s lots of energy and excitement in this area and we’re anxious to work with the customers of U.S. soy around the world,” said Jim Sutter, USSEC CEO.
“The shifts in renewable and biofuels, an increase in demand for sustainable aviation fuels, those things are influencing supply and demand.”— Jim Sutter, U.S. Soybean Export Council CEO
“Markets are ever evolving in the U.S. and around the world, and things are changing within the global vegetable oil complex and the global protein complex. The shifts in renewable and biofuels, an increase in demand for sustainable aviation fuels, those things are influencing supply and demand.”
Mac Marshall, vice president of market intelligence for USSEC and the United Soybean Board, said about 3 billion gallons of biodiesel are currently produced in the United States, but with the recent announcements around renewable diesel, hydrotreated vegetable oil, a much larger market is anticipated in the future.
“The recent announcements in terms of new installed capacity or potential green field construction can bring this market up significantly in the next couple years. That’s all predicated on all of these announced plants being built which is something that 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.
Both renewable diesel and biodiesel draw on the same feedstocks of soybean oil, distillers corn oil, animal fats, canola oil and used cooking oil or yellow grease, of which soybean oil makes up nearly 50% of the feedstock share.
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 the proposed expansions through 2024 and beyond reach fruition, renewable diesel capacity would reach 3.221 billion gallons, bringing the total biodiesel and renewable diesel capacity to 5.976 billion gallons.
“Just because that capacity comes online does not mean that’s going to be the total amount of gallons produced or by extension the full draw of feedstock flowing into that,” Marshall said.
There was excitement early in 2021 with the announcements of more processing plants getting into the renewable diesel area. The optimism was ramped up ever more with the uncommon partnerships between petroleum fossil fuel-based energy space and the crush world of oil seed 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 full off-take of all the soybean oil that would be produced out of that facility,” Marshall noted.
“Then in September Chevron and Bunge announced a large joint venture in which they would be looking to double the capacity of Bunge’s processing plants in Destrehan, Louisiana, and Cairo, Illinois, by the end of 2024. Bunge would be contributing those facilities and Chevron would be effectively infusing it with capital for the expansion at the tune of $600 million.
“When you see a lot of that renewable diesel capacity and the announcements coming online, a lot of that predicated by policy, I think that’s very exciting, but when you start to see some of this private sector investment come in and particularly these uncommon partnerships between really different industries, that’s what makes this seem a lot more tangible and real and exciting. When we see this new crush come online, that’s certainly going to be beneficial for the soybean industry as a whole.”
Marshall turned his attention to international buyers of U.S. soybeans, stressing there will still be plenty available in the export chain even with the increased demand for renewable diesel production.
The anticipated crush expansion would be about a 20% demand increase for all oil feedstocks.
“We’re still going to have ample amounts of whole soybeans that will be available for international markets,” Marshall added.
The success of the renewable fuel industry hinges on federal and state policies.
The Renewable Fuel Standard guides national policy and the RFS sets the stage for the U.S. Environmental Protection Agency to annually develop new renewable fuel obligations to guide the market.
Alexa Combelic, American Soybean Association director of governmental affairs, noted that these renewable volume obligations have been delayed for the past three years. However, she is optimistic about the numbers for the year ahead.
Looking at state policy, several states have carbon goals that drive sustainable policy. Combelic spotlighted California, which kicked off this process in 2009 as the first state to implement a low-carbon fuel standard. This was followed in 2016 by Oregon, and Washington nears completion of the rule-making process for low-carbon.
James Fry, LMC International founder/chairman, said state policies have moved from their reliance on RFS mandates to statutory requirements to reduce carbon intensity in their fuels.
Fry noted that both traditional biodiesel and fuel ethanol have faced blend walls in the proportions in which they can be blended with diesel and gasoline.
“These blend walls mean that higher biofuel demand has to be met increasingly with renewable diesel, the one biofuel that has no limit on the proportions in which it can be blended,” Fry said, adding that California has the highest reliance on renewable diesel where biodiesel blend rates already exceed 20%.
A new market is seen on the horizon in the form of sustainable aviation fuel.
While this is still new, Fry reports that some analysts believe it will be larger than traditional biodiesel plus renewable diesel 10 years from now, but may use ethanol as an input, not oils and fats.
Looking to the future, Fry believes there will be seasonal pressure on the availability of soy oil from U.S. crushers.
“Soy oil is really the ideal oil for meeting the mandates of California and the RFS,” Fry said.
To meet this demand, Fry expects U.S. soybean farmers to expand soybean production by 7 million to 8 million acres, pushing total acres to 94 million to 95 million by 2030-2031.
This expansion, he added, will likely take acres away from corn, wheat and cotton, and he also expects seed companies to the develop soybeans with higher yields and higher oil content.
Accompanying the production of more soybeans will be an increase in U.S. crush, with much of the investment in new capacity already in the pipeline with renewable diesel.
Fry forecasts that for the next five years, the growth in U.S. production will roughly match the growth in crush. It’s not until after 2027, when the growth of sustainable aviation fuel becomes crucial, that export surplus beans could be absorbed domestically by a demand explosion.
One thing is for certain, Fry noted, the surge in U.S. crush will lead to more soybean meal production. Some of which will be used to feed livestock, leading to higher meat exports, and some will go for novel vegetarian and vegan foods. However, most of it will be exported.