The ongoing increase in domestic soybean crush capacity in the United States will eventually eat into the soybean export market and put more emphasis on soymeal exports—according to a long-term projection from Rabobank, the respected multi-national financial and banking services group focused on agriculture and headquartered in the Netherlands.
Growing domestic demand for feedstocks for renewable diesel and sustainable airplane fuel is the single most important element in this rising demand.
Last November, the American Soybean Association reported that for the 2023 to 2025 calendar years, about 430,000 to 530,000 bushels per day of added crush capacity are planned, bumping up to 800,000 bushels per day in 2026. According to the Rabobank report, if all the crush plants that have been announced are completed, they will represent add an additional 600 million bushels of capacity by 2026-27. The Rabobank report cautions that some of these longer timeframe announcements depend on market conditions and other factors for completion.
The Rabobank report, titled “The Mighty U.S. Crop Markets Through 2030,” repeats earlier projections that the U.S. share of global export market will “likely” decrease due to increasing domestic demand domestic demand for feedstocks for renewable fuels. “While domestic demand has been solid, export markets have been more challenging for U.S. crops.” Volatility in the exports markets, combined with the high U.S. dollar, make them unpredictable. On the other hand, “[t]he combined share of domestic demand for corn, soybeans and wheat compared to these crops’ exports continues to show positive growth.”
Maxed-out acres
The report says combined acres for corn, soybeans and wheat “appear to be maxed out under current conditions, meaning the battle for acres will intensify, particularly if and when new demand emerges.” The report cautions that although its trend lines forecast at least some of the 23 announced crush plants coming online in the next several years, yield increases will need to continue for that to happen.
It forecasts that as more crush plants come online and compete with each other, they will bid up the price for soybeans, which could reach $15.50 per bushel. Truck and rail transport will become more important—and fewer barge-loads of soybeans could be moving downriver to New Orleans for export, since crush plants are built close to the source of their feedstocks in the upper Midwest.
While the crush demand will keep soybean prices high for livestock producers, more soymeal will be available, which will help poultry farmers, the report suggests.
Shock scenarios
The Rabobank team calls its report a projection rather than a forecast, since its model depends on certain trend lines continuing. The team ran three “shock” scenarios to test their model in which 1. soybean yields stay below 50 bushels per acre; 2. soybean crush capacity expansion doesn’t happen; and 3. corn yields remain at 180 bushels per acre or above through 2030.
The team didn’t say what could cause the crush plants not to be built. But there have been signs that climate activists in California and the Biden administration are wary of establishing a permanent renewable-fuels interest in their push for an all-electric-vehicle future. Earlier this year, the Environmental Protection Agency proposed retroactively to set total renewable fuel volumes at 17.13 billion gallons for 2020. That was down from a previously finalized rule for the year of 20.09 billion gallons, set before the coronavirus hit. The announcement disappointed biofuels and renewable fuels advocates. That proposal depressed Renewable Identification Number values and especially soybean oil volumes, which could discourage investment in new crush to some extent.
SAFs as bellwether
Owen Wagner, a report co-author who is also a senior analyst of grains and oilseeds at Rabobank and a former CEO of the North Carolina Soybean Producers Association, said the key renewable fuel that serves as a bellwether for biofuels in general is Sustainable Airplane Fuel. For the moment, and for the foreseeable future, there is no technologically feasible substitute for current aircraft engines that burn jet fuel, so reducing that fuel’s carbon footprint is the only alternative. The growth of SAFs will be an important piece in maintaining agricultural commodity use in biofuels, particularly as EV adoption ramps up and ethanol consumption wanes.
Wagner admits that “the end-goal for Western states seems to be full electrification for all light-duty vehicles.” Ethanol usage for ground vehicles has peaked, he said. However, there is a chemical pathway to convert ethanol into SAF as well. Wagner said the GREET model of calculating total life-cycle carbon scores of various fuel types is becoming more refined and adaptable in California, whose fuel and climate policies are often ahead of the rest of the country’s.
Referring to tax incentives included in the Inflation Reduction Act and carbon-credit plans like California’s Low Carbon Fuel Standard, Wagner said, “These carbon credit schemes that some farmers saw as all ‘stick’ before have become more ‘carrot.’” They are also more narrowly tailored; under the IRA, for example, ethanol is only eligible for a tax credit if it used as a feedstock for SAF.
The Biden administration’s ambitious goal of having 50% of all new vehicle sales be electric by 2030 faces many bumps in the road and may not be feasible. But the place of renewable fuels and biofuels seems secure for years at least. “Biofuels have been incredibly successful so far,” Wagner said.
David Murray can be reached at [email protected].
