Rapid Expansion of Soybean Crush Capacity Risks Exceeding Growth of Renewable Diesel

Brian Earnest , Tanner Ehmke and Jacqui Fatka

March 21, 2024

Key Points

• The push for renewable diesel is boosting demand for soybean oil as a feedstock. Soybean crush capacity in the U.S. is expected to expand 23% over next three years to meet the growing demand. While demand puts upward pressure on soybean prices, U.S. soybean exports will slow and imports will rise, thereby moderating soybean prices.
• Competition from imported vegetable oils like canola oil and palm oil, imported fats such as tallow, and imported used cooking oil are also increasing. While U.S. tallow production and imports are not expected to rise substantially, imports of vegetable oils are expected to continue growing, pressuring soybean oil prices. Long term, growing global demand for biofuel feedstock will tighten supplies and slow imports into the U.S. Used cooking oil from China is also suspected of being palm oil, which if true, could result in import restrictions.
• The soybean meal surplus will grow. Domestic demand is expected to increase, but not at the same pace as supply, requiring the U.S. to increase exports. However, global opportunities are murky and export competition is rising, particularly in South America.
• The record crush margins of the last 2-3 years are likely in the rearview mirror with low to moderate margins expected for the near term until policy and industry production targets align on volume levels for renewable diesel. This is raising the margin risk on newly built plants with high breakeven costs of production, or destination plants with higher costs of acquiring and transporting soybeans.

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