USDA Sees Little Renewable Diesel Benefit for Soybean Oil

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December 14, 2021

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by Sean Pratt (Western Producer) Analysts generally concur that the burgeoning renewable diesel industry will result in exploding demand for soybean oil through 2030. But there is one notable exception. The United States Department of Agriculture is forecasting static soybean oil demand from the renewable fuel sector after 2022, at about 12 billion pounds per year.

“I find that a big puzzle, I must say,” James Fry, founder of LMC International and one of the world’s leading vegetable oil analysts, said during a recent U.S. Soybean Export Council webinar.

That is because U.S. biodiesel/renewable diesel demand is projected to reach nearly 30 billion lb. per year by 2030, up from about 18 billion lb. today.

One explanation for the USDA’s lackluster forecast for soybean oil use is that its projection only includes demand from the biodiesel sector while all of the growth is in renewable diesel. But Fry doesn’t believe that is the case.

The other explanation is that the USDA believes the renewable diesel sector will rely almost exclusively on low carbon intensity feedstocks like animal fat and used cooking oil rather than higher intensity feedstocks like soybean oil.

Fry doesn’t think that makes sense either ….

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Mac Marshall, vice-president of market intelligence with USSEC, indicated there might be something behind Fry’s second supposition.

He said the biodiesel process favours low free fatty acids or edible oils and fats like soybean oil, which have less desirable carbon intensity scores.

Conversely, the renewable diesel process favours high free fatty acids, like animal tallow and used cooking oil, which are inedible oils that have more preferable carbon intensity scores.

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Fry said the other huge looming potential demand factor for U.S. soybeans is sustainable aviation fuel.

If that new source of demand materializes as anticipated, it will start to eat into soybean exports in 2028 and by the early 2030s it could absorb most of the exportable surplus of U.S. soybeans, he said. READ MORE

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