It’s one of the fastest growing industries in ag, soybean processing, with several companies announcing plans to build facilities in the coming years. The latest ones....Bunge has plans for a $550-million dollar plant in Morristown, Indiana, and Epitome Energy is also building a $400-million facility in Grand Forks, North Dakota.
Plans are in the works for 18 new soybean processing plants and there are more on the drawing board. With the push for low carb fuels like renewable diesel and Sustainable Aviation Fuel the industry has exploded and it’s a long term positive for farmers improving the price of soybeans by around 13%.
The soybean processing industry is entering a new era, driven by the demand for low carbon fuels like Renewable diesel which can be made from feedstocks like soybean or other veg oils. John Jansen, vice president of strategic partnerships for the United Soybean Board says, “It sequesters and eliminates a significant amount of greenhouse gas and carbon as compared to fossil fuels.”
It’s being used to meet California’s low carbon fuel standard, but the interest doesn’t stop there. Grant Kimberley, senior director of market development at the Iowa Soybean Association says, “Well, right now the renewable diesel capacity is about 1.5 to 1.6 billion gallons a year. And we anticipate that to go up by another approximately 500 million gallons over the next year. There are other announcements to further out where we could see an increase of a couple billion gallons more and ultimately, we think potentially we could get to 6 billion gallons by 2030.”
Kimberley says that’s if you also factor in biodiesel and sustainable aviation fuel. He says, “There’s over a 25-billion-gallon potential market here in the US alone. almost 100-billion-gallon market globally. And a lot of the major airlines around the world are making commitments to us a certain percentage of their fuels come from sustainable aviation fuel.” Tom Kersting CEO of South Dakota Soybean Processors agrees that the market potential is huge. “Just think about demand, just from aviation alone, it will take every drop of soybean oil that’s produced today. It’s that big.”
That has also piqued the interest of the petroleum industry, which is finally aligning with biofuels companies. Kersting says, “When I spoke with BP, they kind of laid it out. They said, we’ve got a lot of big companies coming to us to help them achieve their carbon reduction programs. And they need low carbon fuels or renewable fuels to make that happen. You’ve got to have the biggest lobbying groups the United States ag and petroleum. Instead of butting heads, they’re aligned, working together. We think that gives this industry a lot more staying power long term, and really accelerate the growth.”
This explosive demand has pushed up the price of soybean oil, which is now a much larger percentage of the value of beans, leading to record soy crush margins which earlier this year broke above $3.50 a bushel. Kersting says, “I’m used to working on fractions of a cent in this industry for many years and to talk about dollars is just absolutely unheard of. We expect that to continue. In the soybean industry typically 70% of our revenue comes from meal, and 30% from the oil. We’re getting over half of our revenue from oil side today.” And Kersting says that drove their decision to build another plant at Mitchell, South Dakota and there are more projects on the drawing board. Kimberley says, “Nationwide. We anticipate crush capacity will go up by about 30% In the next several years.”
That over 650 million bushels of beans. So, the next question is can farmers produce enough soybeans to meet this future demand? Jansen says, “I don’t think that’s an issue. You have about 60% of the volume of soybeans that is sent out of the country is export volume, that can stay domestically in some percentages and be used in the production of food and fuel.” Plus, higher soybean yields, and acreage will help fill the gap.
Industry estimates vary widely on how many additional acres of soybeans will be needed for this market, ranging from 5 to 14 million acres initially. However, these fuels can be made with other veg oils like canola or even beef tallow which will also help out.
