To meet the growing demand for soybean oil, U.S. soybean processors are ramping up their production capacity, which is expected to increase by 23 per cent over the next three years.
But that increased capacity will pressure crushers’ margins, said Tannerr Ehmke, lead grain and oilseed economist for CoBank.
“Legacy processing plants with low debt levels will still find profitability in an environment of sharply lower crush margin,” he said.
“But new crush plants built at substantially higher costs and interest rates will have higher breakeven costs. And destination plants located outside of soybean-growing regions are at greater financial risk due to increased reliance on transportation to acquire soybeans.”
Rising demand for soybean oil for use in renewable diesel will support soybean oil prices, he said.
But competition from imported vegetable oils such as canola and palm is increasing.
American farmers are planning to ramp up canola production and that has meant Canadian seedstocks for this year are fully committed, according to some recent Canadian news reports.
Soybean oil remains the most widely used feedstock for biobased diesel production and accounts for roughly 35 per of monthly feedstock use, said Ehmke.
However, that percentage has fallen from 50 per cent a year ago as use of competing oils, fats and greases increases. Beef tallow has climbed to more than 20 per cent of total feedstuff usage, while yellow grease and used cooking oil account for 20 per cent.
