Chip Flory: The Domestication Of The U.S. Soybean Market
Soybean oil futures doubled in value from November 2020 to June 2021, then entered a sideways trading range pivoting on the 60¢ level. Soybean oil was a 30¢ per pound commodity and is now at 60¢ per pound.
SUSTAINABILITY GOALS
Low Carbon Fuel Standards (LCFS) are in place in California and Oregon, with programs being considered in six other states. With lawmakers focused on environmental social governance and carbon-neutral fuels, odds are the momentum to replace petroleum-based diesel with renewable diesel will not be exhausted soon.
“The U.S. has capacity to produce about 900 million gallons of renewable diesel this year and will have capacity to produce 2.1 billion next year,” says Bill Lapp, president of Advanced Economic Solutions. “If you believe all the investments, it could be 6 billion gallons soon. We just won’t have enough feedstock to make that much.”
Renewable diesel is not biodiesel, although both are biomass-based diesel fuels. The Energy Information Administration says biodiesel meets specifications to allow blending with petroleum distillate/diesel. Renewable diesel meets the specs of petroleum diesel. It is molecularly the same as petroleum-based diesel and can fill 100% of the tank.
Canola oil is not cleared for renewable diesel, but groups are trying to change that. Even then, Lapp argues it will be difficult to find enough tallow (used cooking oil, grease, soy oil, corn oil and canola oil) to satisfy demand for renewable diesel.
That’s why groups, such as Mike Kinley’s Ag Development Group, are increasing production. The group’s Shell Rock (Iowa) Soy Processors will start taking soybeans in 2022, and its Platinum Crush in Buena Vista County, Iowa, will follow in 2023. Kinley says Phillips 66 invested in the Shell Rock facility. In return, Phillips receives access to 100% of the plant’s soy oil. Marathon Oil reportedly has a similar agreement with ADM on a new plant in Spiritwood, N.D.
Hear more about Iowa’s new soybean crushing plants on “AgriTalk.“
“This is going to lead to the domestication of the soybean market,” says Peter Meyer, head of grains and oilseed analytics for S&P Global Platts.
Besides stressing feedstock supplies to make renewable diesel, Meyer says development of bio-based sustainable aviation fuels will add demand.
“We will start crushing for oil instead of meal by 2025 and use all that oil while stockpiling meal,” he says. “The U.S. export system will have to evolve, and that means beans and oil stay here and the meal gets exported.”
AN IMPORTANT ASSESSMENT
There’s little doubt Pro Farmer Crop Tour observations of soybean yield potential will gain importance as total soybean use climbs, but using pod counts as the only predictor of yield is foolish. By combining pod counts, soil moisture levels recorded by scouts and in-field plant health observations, the Tour provides a full-color snapshot of mid-August yield potential.
