USA – Highlighted in a recent report by CoBank’s Knowledge Exchange, the United States is experiencing a surge in demand for soybean oil as renewable diesel gains favor over traditional diesel due to its reduced carbon footprint. 

This shift is driving US soybean processors to ramp up their production capacity, anticipating a remarkable 23% increase over the next three years.

Despite enjoying record-high profit margins recently, soybean processors are bracing for a moderation in these margins. The market is adapting to the augmented domestic soy crushing capacity and mounting global competition. 

Alternative feedstocks for renewable diesel, such as imported vegetable oils, tallow, and used cooking oil, are exerting pressure on soybean oil prices. Additionally, an oversupply of soybean meal is anticipated to persist, leading to continued weakness in its prices.

The CoBank report indicates that US soybean processors are prepared for the impending margin downturn after years of buoyant profits. However, newer high-cost plants, especially those situated away from soybean-growing regions, face heightened financial risks due to elevated breakeven costs and reliance on transportation for soybean acquisition.

While the growing demand for renewable diesel is expected to bolster soybean oil prices, competition from imported oils like canola and palm is intensifying. 

Although soybean oil remains the primary feedstock for biobased diesel, its utilization has declined from 50% to approximately 35% as alternatives gain traction.

The US’s expansion in soybean processing capacity is poised to augment soybean meal supplies, potentially exerting pressure on processor margins. Major consumers of soybean meal, such as the domestic swine and poultry industries, could benefit from this abundance. However, the ability of the US livestock industry to absorb this increased supply remains to be determined.

According to Brian Earnest, lead animal protein economist for CoBank, the growth in US animal protein production has been tempered by higher input costs and fluctuating consumer demand trends. While broiler integrators might capitalize on the growing soybean meal supplies, the overall scope for domestic usage is limited, underscoring the significance of export markets.

Following Argentina’s historic drought in 2023, which adversely affected its soybean crop, US soybean meal exports experienced growth. However, the competition for export market share is expected to intensify, particularly in key markets like Southeast Asia, highlighting the need for strategic market positioning amidst evolving trade dynamics.

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