Advanced Biofuel Facility in Iowa

(Photo: Iowa Soybean Association)

Opportunities abound for soybean oil

September 23, 2021 | Aaron Putze, APR

What was once a backseat driver in creating soybean demand and profitability now has two hands firmly on the wheel.

Soybean oil demand is booming, a trend that’s expected to have staying power.

“We’ve come a long way in a short time in terms of building markets for soy-based energy,” says Grant Kimberley, a farmer from Maxwell and Iowa Soybean Association’s (ISA) senior director of market development. “Whether for fuel or as protein for livestock and people, demand is growing, and there’s reason to be optimistic as we look to the next two to three years.”

Demand drivers for soy abound, benefiting soybean and livestock farmers and the environment.

Whole soybean sales to China and other key buyers are on the uptick. Soybean crush is running strong, thanks to improvements in the global economy and a rebuilding of pig herds in south Asia after being decimated by African Swine Fever.

Stepped-up efforts to curb carbon emissions domestically are also fueling demand for cleaner energy alternatives, including biodiesel and renewable diesel.

More conversations about carbon and climate are timely topics for the biodiesel industry to be involved in, says Donnell Rehagen, CEO of the National Biodiesel Board (NBB).

Winning formula

“Renewable diesel, biodiesel and sustainable aviation fuel are making headlines,” he says. “All drive growth for oil stocks, and that’s a winning formula for soybean farmers.”

The proof is in the numbers. Kimberley says biodiesel demand accounts for 13% of the net market value of soybeans, or $1.69 per bushel, when cash prices hit $13.

More demand resulting from higher biodiesel blends, renewable diesel and new uses will only bolster these numbers.

Kimberley, who also serves as Iowa Biodiesel Board’s (IBB) executive director, says biodiesel blends up to B20 can be used in any diesel engine, and some users can even go up to 100%. B20 burns cleaner than petroleum-based diesel fuel and significantly reduces particulate and carbon emissions.

“Many of the old concerns about using biodiesel no longer apply,” he says. “It’s a better product today than 20 years ago, as are the engines it powers. Experience also goes a long way in knowing how to use it.”

Representatives of the biofuels industry, including Kimberley and Rehagen, gathered in Missouri in August to pinpoint obstacles and opportunities for biomass-based diesel like biodiesel and renewable diesel. All agree the glass is half full for generating more demand and profits for soybean growers.

They acknowledge the rise of renewable diesel and the concerns some have about its impact on future biodiesel demand and competition for feedstocks. But Rehagen is quick to add that much of the angst is misplaced.

“While renewable diesel and biodiesel require different production processes, both use the same feedstocks. For soybean oil and values, growth in renewable diesel will be a positive driver for soybean usage and prices,” he says.

While the NBB advances the entrance of soybeans into renewable diesel markets, they’re also involved in conversations about electrification of passenger vehicles and public transportation fleets.

Electrification struggles

David Cobb, NBB’s director of federal affairs, says calls for full-on electrification of the nation’s over-the-road fleets are premature.

According to Cobb, credible studies demonstrating the feasibility of rapidly expanding the number of electric vehicles are lacking. In California, home to some the nation’s most progressive carbon reduction policies, just 2% of over-the-road passenger vehicles are electric powered.

“It’s going to be a long road to large-scale electric vehicle usage,” Cobb says. “In the meantime, let’s talk about options and opportunities to decarbonize today. The answer is cleaner-better-now biodiesel and renewable diesel.”

Like renewable diesel, sustainable aviation fuel will drive oil demand growth. Just one domestic producer of sustainable aviation fuel is operating, but that’s likely to change as more airlines commit to reducing carbon emissions.

Sustainable aviation fuel will most likely rely on soybean oil. Farmers, flyers and the environment will all be beneficiaries, he adds. “Airplanes can’t be powered by electricity,” Rehagen says.

Federal and state legislation prompted by growing public interest in reducing the nation’s carbon footprint are also powering demand for energy made with soy.

Legislation seeking to boost renewable fuel production and usage in Iowa will likely be discussed again when legislators return to Des Moines in January.

Cobb says biofuels interests are also gaining traction in infrastructure packages being debated by Congress. Among them is a $1 billion program to increase the number of school buses powered by biodiesel and electricity.

NBB, IBB, ISA and the American Soybean Association are also advocating for a Biofuel Infrastructure and Agricultural Product Market Expansion Act and three-year biodiesel tax credit extension (the latter through Dec. 31, 2025). Both measures are garnering increased Congressional support.

Rocketing demand

Biodiesel and renewable diesel markets accounted for almost 2 billion gallons of demand in 2013. Last year, those totals rocketed to nearly 3 billion.

Demand is up 4.9% in 2021, exceeding 2020’s growth of 4.1%.

“The growth last year occurred despite a nearly 8% decrease in U.S. diesel consumption,” Kimberley says.

Every conversation about demand has an impact at the farm gate, a reminder that soybean farmers are indeed involved in a national and international business.

Demand for soybean oil increases the amount of soybeans crushed. More crush produces additional inventories of soybean meal, an efficient and readily available protein supplement for animal, poultry and fish feed. Livestock producers are the ultimate beneficiary of this formula.

“Clearly, it’s an exciting time for feedstocks,” says Mac Marshall, United Soybean Board vice president of market intelligence. “It’s a point we make often and one that was envisioned 20-30 years ago when discussing how to find markets for the oil.

“But we can’t rest on our laurels,” he’s quick to add. “We must be vigilant about expanding domestic and global markets for soybean meal. If we don’t, we risk creating bottlenecks in the system, adversely affecting soybean crush.”

Foresight proven

Rehagen says the world of opportunity involving soy proves the wisdom, foresight and investment soybean farmers have made in the fuel industry over the past three decades.

“There’s a lot of momentum because soybean farmers stepped up and took a seat at the table long before most realized the potential of the oilseed. They took the wheel by making a financial commitment to play a key role in home-grown, renewable fuel. It’s an investment that’s yielding a bountiful harvest.”

This story was originally published in the October 2021 issue of the Iowa Soybean Review.