Soybean oil demand expected to grow due to increasing demand from renewable diesel industry.
As many people know, soybeans are a key ingredient to many products consumed daily by consumers. Soybeans just may become even more of an essential commodity according to this article. “The world’s biggest agricultural commodity traders are gearing up to profit from a boom in the American renewable diesel energy.” You read that correctly, Renewable Diesel. Renewable diesel is a fuel made from biomass that has the same properties as the fossil fuels we use now to fuel our trucks and tractors. Soybeans are essential when producing the cooking oils needed for renewable diesel.
According to the article, Cargill Inc. has already invested $475 million dollars to boost its capacity to process soybeans. Agricultural Commodity Traders are targeting the growing market as multiple American refiners continue to jump on the bandwagon for “green” diesel. “While many refiners will seek to produce it from discarded cooking oil or animal fats, they will need to turn to traditional vegetable oils made from crops like corn and soybeans to meet demand.” The increased demand for soybean production also coincides with more and more restaurants across America reopening, and boosting the demand for cooking oils, such as soybean oil. “Soybean oil demand could increase by half a billion pounds this year due to the extra demand from the renewable diesel industry, Juan Luciano, ADM’s CEO said in January.”
As previously mentioned, Cargill has already invested $475 million dollars to boost its capacity to process soybeans. They have invested this into doubling the soybean processing capacity at one of its plants located in Sidney, Ohio and expanding processing by approximately 10% at another plant located in Cedar Rapids, Iowa. “Bunge, the world’s largest oilseeds processor, said it plans to allocate some capital for investments in the area, which includes increasing tank-storage capacity and improving efficiency of its refineries. While the traders all want to supply the renewable diesel industry, they don’t want to produce it themselves.” Markets have already caught wind of the new demand for soybeans, and soybean oil futures have increased by 25% in 2021.
With this being great news for the soybean industry, there is always a risk of over-investing. “Some traditional biodiesel plants may end up closing as a result of the renewable diesel boom, while too many traders fighting for one market could end up squeezing margins.” Only time will tell the success of renewable diesel.
As agriculturalists, it is very important to be aware of predictions for the markets and commodity prices/demand. Soybeans are already used in everyday products including baked goods, cereals, cookies, high-protein energy bars, livestock feed, and numerous other things. Ag traders have already begun investing in the soybean commodity markets, which is a good sign for soybean producers but may not be a good sign for livestock producers or corn producers that supply corn for ethanol production.
Personally, I think it is still too early to tell whether renewable diesel is a viable option for the future, but I think it is super interesting that companies are investing money to increase the production of soybeans. The market for renewable diesel has great potential for more than just the agricultural industry. I am curious to see how the next few years shape the future for a product such as renewable diesel. Let us know what you think about renewable diesel and its use of soybean oil!
References:
[1] Isis Almeida, “Ag traders gear up for a green boom” Farm Progress, March 30th, 2021
https://www.farmprogress.com/print/434018
