Marrying Soybeans and Renewable Diesel

Renewable Diesel Plans Could Outstrip Soybean Acres, Soy Oil Supplies

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
Connect with Chris:
A look at renewable diesel production, including the forecast through 2030 by Rabobank. The blue charts show renewable diesel capacity while the orange line shows the vegetable oil needs it will take to meet that demand. (Image from Rabobank: The Rush to Crush, September 2021)

OMAHA (DTN) -- Analysts are having a hard time modeling out the soybean oil needs in the near term and long term as more renewable diesel projects are announced. For now, forecasts call for higher soybean prices, expanded acreage, and not enough soybean oil to go around.

If everything is built out as projected, farmers would have to add tens of millions of acres of soybeans and yield increases to keep up with the crush demand. To hit the numbers, soybean production would have to grow by roughly 3.6 billion bushels by 2030.

USDA's Economic Research Service this week projected soybean oil will see greater demand starting in 2022, while Rabobank offered a similar outlook projecting greater crush capacity starting in 2023 as more renewable diesel facilities come online.

Renewable diesel right now has multiple government policies driving new production. The Renewable Fuel Standard generates renewable identification numbers, or RINs, for renewable diesel. Then there is the $1-per-gallon Biodiesel and Renewable Diesel Tax Credit that is set through 2022 but could be extended through 2026 in the Build Back Better Act.

California's low-carbon fuel standard (LCFS) is the biggest factor right now as California and a few other states move to decarbonize liquid fuels. Under California's law, there are a lot of products and pathways to reduce emissions, but renewable diesel has taken hold.

"They (California) put together their law to meet their annual goals of reducing carbon emissions, which is an admirable goal, and we'll make that comment up front," said Steve Nicholson, senior grains and oilseed analyst at Rabobank.

That's ramped up production to the point renewable diesel is now the single-largest fuel segment for generating LCFS credits at $153 per carbon ton, down in value about $32 a ton since early July. While each facility gets a different carbon score, an LCFS credit generally translates into 83 cents to 86 cents a gallon for renewable diesel or biodiesel.

Oil refiners are helping drive the move to renewable diesel by modifying their refineries or building new ones. They are also increasingly partnering with agricultural companies to make that happen.

"And they are able to get their green box checked and get investors off their backs if you have activist investors and be able to make some money in some new industry," Nicholson said. "But in the sense of putting this together, no one thought, 'Oh, do we have enough feedstocks to do this?' And the bottom line is we don't."

The list of proposed and under-construction renewable diesel facilities around the country would spike production from 770 million gallons in 2021 to at least 3 billion gallons in 2023. EPA already forecasts 2022 production at 1.59 billion gallons. The U.S. Soybean Export Council projected total new capacity looking ahead at 5.97 billion gallons.

That stacks on top of biodiesel production, which is a separate product and different fuel. Without diving into a technical paper, renewable diesel is a hydrocarbon while biodiesel is a mono-alkyl ester, produced in different processes. Renewable diesel can replace petroleum diesel, while biodiesel is approved to blend with petroleum diesel fuel, according to the Department of Energy.

ADM and Marathon Petroleum Corp. on Wednesday announced they are partnering on a $350 million soybean processing facility in Spiritwood, North Dakota "to supply the rapidly growing demand for renewable diesel fuel." Their project, which is expected to be completed in 2023, "is expected to produce approximately 600 million pounds of refined soybean oil annually, enough feedstock for approximately 75 million gallons of renewable diesel per year."

Dan Basse, president of AgResource, told agricultural bankers in November he had never had oil refiners reaching out to him about soybean supplies until this year. The LCFS credits, the EPA RINs and tax credits add up, he said.

"When you look at the credits out of California or these other states for renewable diesel, and you get twice the RINs that come along with it," he said. "It's a no-brainer."

Refiners are transitioning out of fossil fuels into renewable fuel markets, leading to ties such as Marathon partnering with ADM or Chevron partnering with Bunge for soybean oil feedstocks.

"There's not enough feedstock, so that's what they are doing to assure themselves of that feedstock," Basse said.


In an analysis this week, Rabobank projects renewable diesel production to hit more than 6.1 billion gallons by 2030. That would push vegetable oil demand to about 47 billion pounds (21.4 million metric tons). To put that into perspective, Rabobank notes the U.S. right now produces about 24 billion to 25 billion pounds (11 mmt to 11.3 mmt). That basically requires soybean and other vegetable oil production to double to meet the demand driven by renewable diesel.

Rabobank offered a recent outlook showing that over the next three years, $2.8 billion will be invested to expand soybean crush capacity in the U.S. -- adding roughly 300 million bushels. That will cover meal demand, but not enough to meet rising oil needs, Rabobank's analysts noted. While companies move to latch onto the renewable diesel market, the food sector will likely see higher prices with the aggressive competition over soybean oil.

To put the soybean numbers into context, USDA pegs domestic soybean crush for 2021-22 at 2.19 billion bushels. Rabobank and other analysts project that to meet the projected need of 47.1 billion additional pounds of soybean oil, another 3.6 billion bushels of soybeans are needed -- just for the crush. If every soybean bushel now going to meet export demand -- 2.05 billion bushels -- went to domestic crush, there would still be a shortage of more than 1.5 billion bushels.

Rabobank forecasts soybean acreage would need to increase by nearly 12 million acres in the short term to cover expanded crush demand for renewable diesel without hurting U.S. soybean exports. To get farmers to increase soybean acres by that much, soybean prices would also need to increase about $5 a bushel into the $18-per-bushel range by the 2024-25 crop year.

Still, to meet the growing renewable diesel market, the U.S. would still have to dial back exports of raw beans and drive up exports of soybean meal. To make it work, the U.S. would have to displace soybean meal out of Argentina and push the Argentinians into exporting more whole beans, allowing the U.S. to fill a bigger role in sending out soybean meal. Domestic soybean meal, though, will also be cut in half to roughly $150 per short ton, Rabobank projects. Higher soybean prices and lower soymeal prices "will heavily weigh on the soybean crush industry. Soy oil would have to carry an even higher share of the margins, and high soy oil prices would significantly challenge the food sector to shift to other oils to allow more soy oil in renewable diesel."

Soybean oil has more than doubled in price to an average forecast of 65 cents a pound for 2021-22. That's prompted the American Bakers Association and other edible oil stakeholders to push back on EPA's proposed mandated blend volumes to make biodiesel. The bakers and others are upset over EPA expanding biodiesel and renewable diesel as advanced biofuels. EPA noted it had underestimated the growth of renewable diesel, and higher volumes are coming from both soybean oil and corn oil from ethanol plants.


Basically, EPA forecasts in 2022 soybean acreage going to 90 million acres again, a 2.8-million-acre bump from last spring's soybean planting. EPA sees higher crush for biodiesel and a reduction in soybean exports as a result.

Forecasts over acreage shifts right now are mixed. DTN Lead Analyst Todd Hultman said he's seen soybean acreage ranges from a low of 87 million acres to a high of 90 million acres.

In its blend-volumes proposal last week, EPA projected renewable diesel volumes in 2022 would increase by 820 million gallons. Other biodiesel/renewable feedstocks are increasing in use -- mainly used cooking greases, corn oil and canola oil -- but soybean oil still takes up the bulk of biodiesel crush. Soybean oil accounted for 32% of biodiesel production in 2019-20, and it continues to increase. Potentially, EPA cited, biodiesel production from soybean oil could double if it were shifted from other uses, including food.

Biodiesel production has been relatively steady since 2018 when it was 1.84 billion gallons. For 2021, domestic biodiesel production is estimated at 1.78 billion gallons with EPA forecasting the same production for 2022.


If all the renewable diesel capacity gets built out, within three to four years, there could be either a risk of deficit in vegetable oils or millions of new acres needed in soybeans, as well as other crops such as canola.

"If you look at it all going to soybeans, you would need upwards of 55 million to 60 million more acres of soybeans," Nicholson said. "We just don't have that in the United States." Nicholson added, "Soybeans would basically wipe out corn and wheat acres in the U.S. just to produce enough oil for this. But we don't have the crushing capacity to do it."

A more likely scenario is that not all of the planned renewable diesel plants end up being built. Until both the market and policies get worked out, renewable diesel will test expansion of acres, domestic crush capacity and exports.

Basse's projections fall in line with Nicholson's. Basse said calculations show it would take 40 million additional soybean acres to run these not-yet-built renewable diesel refineries at 80% capacity.

"The math boggles your mind, but the investments are being made," Basse said. "I don't see how you slow it down at this point."

Scott Gerlt, an economist with the American Soybean Association, said some of the acreage projections don't forecast changes in soy oil exports or domestic crush expansion, or renewable diesel facilities not being built. Gerlt said the growth of renewable diesel is leading to more questions from people.

"Everyone's trying to figure this out, basically," Gerlt said. "I think it's going to be a combination of things that will allow the growth to happen. We're going to build out a certain amount of new capacity, though."


This expansion of renewable diesel also doesn't quite factor in where sustainable aviation fuels (SAF) will come into play. The airline industry is clamoring to lower its emissions as well. The Build Back Better bill has a tax credit of up to $1.25 a gallon and $300 million for research, along with other potential funds for SAF infrastructure. Ethanol, however, also will get a chance to operate in this space with some further refining to change the molecular structure.

ADM also recently partnered with GEVO Inc. to focus on SAF and other low-carbon hydrocarbon fuels. ADM estimates 900 million gallons of ethanol from plants in Illinois, Iowa and Nebraska could be converted into 500 million gallons of SAF fuels.

Both renewable diesel and ethanol moving aggressively into aviation fuels will also require the federal government to consider different options for modeling out carbon scores through language in the legislation.

"When you look at sustainable aviation fuel, that's an industry that's kind of in its infancy, and I don't mean that in a bad way, but it's just kind of the nature of the beast," Nicholson said.

Chris Clayton can be reached at

Follow him on Twitter @ChrisClaytonDTN

Chris Clayton