NATIONAL — Soybean growers could see demand growth from the biofuels sector in the next decade, reminiscent of the ethanol boom that shifted into high gear in the early 2000s and pushed corn use to new heights.
The key product set to take off is renewable diesel, not to be confused with biodiesel.
Both fuels use any oil or fat, mostly soybean oil, as feedstock. But the processing for each product differs, with renewable diesel generated from more high free fatty acid feedstocks, which produce better carbon intensity scores.
“Renewable diesel has emerged. It’s all about reducing the carbon intensity of fuel blends,” James Fry, founder and chairman of LMC International, said during a webinar hosted by the U.S. Soybean Export Council (USSEC).
Mac Marshall, vice president of market intelligence for USSEC and the United Soybean Board, reported current production totals about 2.4 billion gallons of biodiesel and nearly 1 billion gallons of renewable diesel nationwide each year.
But, with proposed plants all over the U.S., particularly along the Southern coast and Pacific Northwest, potential new capacity for renewable diesel production could skyrocket to 5.97 billion gallons by 2024.
“What makes it exciting is the partnerships forming (between soy crushers and the petroleum industry),” Marshall said. “When you see the private sector investments coming in, it makes this seem more tangible.”
One partnership to accelerate renewable diesel production announced in the fall involves a 50/50 joint venture between Chevron U.S.A. and Bunge North America.
The venture aims to establish a reliable supply chain from farmer to fueling station for both companies. Bunge is expected to contribute its soybean-processing facilities in Cairo on the southern tip of Illinois and in Destrehan, Louisiana, while Chevron contributes $600 million. The two companies anticipate doubling the combined capacity at the two facilities by 2024.
“As the world’s largest oilseed processor, we are pleased to expand our partnership with an energy leader to increase our participation in the development of next generation, renewable fuels,” said Greg Heckman, Bunge CEO. “We share a commitment to sustainability and reducing carbon in the energy value chain.”
Demand for vegetable oil is expected to grow worldwide, but production of Indonesian and Malaysian palm oil could fall due in part to declining production area and environmental constraints, Fry noted. That puts soybean oil in the driver’s seat as the key feedstock to fuel renewable diesel.
LMC projects global vegetable oil production could increase 2% annually, but growth of soy output could reach 3.5% a year while sunflower and canola oil production increase just 1.5% and palm oil production possibly stagnates.
“The one oil that’s going to meet this demand growth is soybean oil,” Fry said. “By 2030, soy oil will be significantly ahead of palm as the leading oil (worldwide).”
With soybean production on the rise in South America and the U.S., Scott Gerlt, economist with the American Soybean Association, believes there will be plenty of supply to meet expanding soybean demand for renewable diesel production. He does not expect the new market to resurrect the food-versus-fuel debate sparked by the introduction of the Renewable Fuels Standard in 2005.
“There’s plenty of supply. We’re seeing increased crush capacity,” Gerlt said. “And, we have to remember that for every pound of soy oil, we get 4 pounds of meal.”
As for the near future, Gerlt doesn’t anticipate a large increase in U.S. soybean plantings in 2022.
“In the U.S., a lot of planting decisions are driven by rotation, so we don’t usually see wholesale changes in acreage,” he added. “I’m not expecting a wide swing on acres at this point.”