USA The soyabean and edible oil sector in the USA is expected to experience major disruption due to the growth of the country’s renewable diesel market Keith Nuthall An anticipated surge in supply and demand for renewable diesel is likely to cause major disruption to the American vegetable oil market and industry, notably soya. With the US government and certain states regarding renewable diesel as a swift way to further reduce carbon emissions and meet Paris agreement climate change targets, the prospects for major additional purchases of soyabeans within the US domestic market are very real. A note from the EU Energy Information Administration (EIA) released in July projected that because of planned producing and refining capacity projects, US production of renewable diesel would rise from 0.6bn gallons/year or 38,000 barrels/day (b/d) in 2020 to 5.1bn gallons/ year (330,000 b/d) by the end of 2024. Prices are already rising and will probably increase further, causing a major headache for food industry buyers of soyabeans who have already been struggling with inflationary pressures that they have been passing on to customers. The latest data from the US Department of Agriculture (USDA) notes how American soya producer revenues have boomed to US$46bn in 2020, up from US$30bn in 2019. But without additional production coming online, or the diversion of US soya exports to the domestic market, these prices may grow further. Soyabean production was up in 2020, but nowhere near the increase in renewable diesel demand – 4.1bn bushels, up from 3.5bn bushels in 2019. Soyabean oil production expanded more slowly (25.6bn pounds in 2020, compared to 24.9bn in 2019). A key driver of this change is political – the current federal and many state administrations in the USA are committed to fighting climate change. This has sparked the federal Renewable Fuel Standard (RFS) and the California LowCarbon Fuel Standard (LCFS), with similar rules in Oregon and Washington state, for instance, which favour the use of renewable diesel. While it uses the same soya feedstock as biodiesel, the manufacturing process is completely 34 OFI – NOVEMBER/DECEMBER 2021
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Shake-up in oil m different, and it is popular because it can be easily substituted for fossil fuels without changing combustion systems.
Soya supply crunch
This is creating the risk of a real supply crunch. Currently in 2021/21, around 50% of the soyabeans grown in the USA are crushed domestically to make oil and meal, with the remainder exported as whole beans for crushing elsewhere. In terms of product, 20% of crushed beans become oil and the remainder meal, the vast majority used to feed livestock, especially poultry and pigs within the USA. Soyabean oil is currently used domestically to make edible products, for baking and other food ingredients, plus some industrial applications, such as paint, as well as the burgeoning renewable diesel (and biodiesel) feedstock. Around a third of domestic US soya oil supplies is used to make renewable diesel or biodiesel. But that proportion is expected to grow and that may disrupt the market and the industry. American production could increase through farmers switching to soya from different crops or diverting exports to the domestic market, which would be ready to consume beans through major new renewable diesel plants. An example would be Marathon Petroleum’s refinery in Martinez, California, which may produce
730M gal/y (48,000 b/d) in 2023; and Phillips 66’s Rodeo Renewed project in San Francisco, which could make 800M gal/y (52,000 b/d) of renewable fuels by 2024. That would require additional crushing capacity in the USA and companies are investing in this area. A major announcement came in August, when Archer Daniels Midland (ADM) announced it would work with Marathon to set up a crushing plant in North Dakota to handle 150,000 bushels/day of soyabeans by 2023. In September, oil major Chevron and commodities trader Bunge announced plans to invest US$600M to double the capacity of two Bunge crushing facilities, which together currently crush 7,000 tonnes/day of soyabeans. Commenting on the changes, Thomas Hammer, president of the US National Oilseed Processors Association (NOPA) said: “We have never seen anything like it. We’re in uncharted waters. The markets are going to have to deal with this. I don’t know how this will all shake out. It’s the biggest change in 20 years.”
Climate change threat
Technical advancements could also boost yields, but researchers have stressed that the US soyabean sector will have to first contend with climate change, as with other oilseed crops such as this summer’s drought-reduced canola harvest www.ofimagazine.com
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