RENEWABLE DIESEL BOOM IS WILD CARD FOR U.S. SOYBEANS
9/17/2021
Thanks to a rush in investment, the
renewable diesel industry is in a building boom in the United States
and abroad “that is very comparable, I believe, to the ethanol boom of
the mid-2000s,” said economist Scott Irwin of the University of
Illinois on Thursday. During a webinar, Irwin said the sudden increase
in facilities was a wild card in the price of soybean oil, one of the
feedstocks for the biomass-based fuel produced from vegetable oils and
animal fats.
![](images/images_09_20_2021/SoybeanHarvestSunset-CloseUp.jpg)
U.S. production of renewable diesel, currently less than 1 billion
gallons a year, could reach 5 billion gallons by 2024 based on a spate
of announced or proposed projects, said an Energy Department agency in
July. “This growth is driven by higher state and federal targets for
renewable fuel, favorable tax credits, and the conversion of existing
petroleum refineries into renewable diesel refineries,” said the Energy
Information Administration (EIA).
At present, about one-third of U.S. soy oil production, or 8.8 billion
pounds, is used in making biofuels. Consumption will grow to 11
billion pounds, or 43% of annual production, in the marketing year
that opens on Oct. 1, estimated the USDA last
week.
“This is a big wild card in the soybean complex,” said Irwin. Roughly
8.5 billion pounds of feedstock is needed to produce 1 billion gallons
of renewable diesel, he said. A sharp increase in production could
overwhelm domestic soy oil production, which totals 25 billion pounds
a year.
Already, soy oil prices are near parity with soybean meal on the
futures markets. “That’s an extraordinary event,” said Irwin. Usually,
soy oil is two-thirds the price of soymeal.
Petroleum giant Shell said it would build a biofuels facility in the
Netherlands to produce 820,000 tonnes of renewable fuel per year, more
than half of it sustainable aviation fuel and the rest of it renewable
diesel, reported Reuters.
The plant would go into operation in 2024.
The EIA said that producers of biodiesel and renewable diesel rely on
incentives such as tax credits and tradable credits in the Renewable
Fuel Standard and California’s low-carbon fuel standard to make a
profit. “Feedstock availability and government incentives will likely
continue to play a role in the financial viability of new renewable
diesel production capacity in the near term,” it said.
The Farmdoc Daily webinar is available
here.
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