Stu Ellis: Is There a Soybean Oil Boom on The Horizon?

By Stu Ellis

As farmers scratch their heads, wondering whether to plant more corn or more beans next spring, there are some folks in high places concerned we won’t have enough soybeans.

There does not seem to be any disconnect.

But those with crystal balls say they have a clear view that soybean oil will be the basis for low-carbon diesel fuel in the not-too-distant future.

Even though politicians are at sixes and sevens over funding climate policy, the automotive and petroleum industries seem to have decided already what they are going to do and Corn Belt farmers are going to be the next oil sheiks of the world.

Soybean oil, that is.

California’s new low-carbon fuel requirements are driving this bus in an effort to eliminate carbon emissions from engines.

As a result of this movement, ADM is partnering with Marathon Petroleum company on a new soybean processing plant in North Dakota.

Similar alliances are being announced by Loves and Cargill, and by Chevron and Bunge.

“Green” fuels that will be produced from such alliances, known as renewable diesel, are getting a lot of attention, except from the U.S. Department of Agriculture (USDA) and the soybean market.

Economist James Fry of LMC International told a soybean conference last week that soybean acreage will need to expand by 7 million to 8 million by the end of the decade.

Dan Basse, head of AgResource, told seed companies a week ago that soybean oil production will have to double by 2024 to meet the demand, and soybean acreage would have to increase by an astounding 40 million to meet eventual demand.

Is that possible?

Farmers harvested an estimated 86 million acres this year.

"If I need 40 million acres, I need to displace lots of other crops," Basse said in an interview with Agri-Pulse.

At most, 2 million to 3 million acres could feasibly come from corn given the market's need for 15 billion bushels of that crop each year, he said.

"We think we're nearing peak farmland."

No one is making way for more soybean acreage, despite the processing industry expecting to boost capacity by 3 billion gallons of renewable diesel in the next couple of years, according to soybean economist Mac Marshall of the United Soybean Board.

Market economist Chad Hart of Iowa State University says in his monthly newsletter, “If all of the soybean oil from the current domestic crush were utilized for renewable diesel, it would produce roughly 2.8 billion gallons.

"To meet the capacity targets for 2024 with soybean oil, the U.S. would need to dedicate approximately 90% of the current soybean crop.

"That would create another biofuel boom, if it comes to pass.

"The key word there is 'if.'”

Driving that “if” will be state and national governmental policy, and international response from OPEC member countries.

As Hart says, “Several states, beyond California, are considering low-carbon fuel standards, indicating the policy push will continue.

"The wildcard will be energy prices and if OPEC sees these developments as a big enough threat to their industry.”

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