CoBank report concerned overbuilding soybean crush capacity out of step with demand

In Colorado, demand for soybean oil as a feedstock in the production of renewable diesel is rising as the U.S. aims to increase adoption of cleaner burning fuels. Renewable diesel has emerged as the preferred low carbon replacement for traditional diesel, and U.S. production is projected to increase sharply in the years ahead. 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% over the next three years.

While soybean processors have benefitted from record-high profit margins in recent years, margins are expected to moderate as the market adjusts to the increase in domestic soy crush capacity and growing global competition. Soybean oil prices have come under pressure due to increasing competition from alternative renewable diesel feedstocks including imported vegetable oils, beef tallow and used cooking oil. And persistent weakness in soybean meal prices is likely as surplus grows.

According to a new report from CoBank’s Knowledge Exchange, multiple years of record margins have left U.S. soybean processors well-prepared to weather the inevitable downturn in margins. However, overbuilding U.S. soybean crush capacity, combined with sustained levels of low processing margins could threaten the viability of new, high-cost plants in the long term.