By Joe Janzen and Yu-Chi Wang
The US soybean industry has responded to the renewable diesel boom by increasing production of soybean oil, an important feedstock in bio-based diesel production. In recent farmdoc daily articles (Janzen and Wang, 2025 and Janzen, Irwin, and Wang, 2025) , we show increased US soybean oil production is part of longer-run gains in soybean processing efficiency. In the past five years, these efficiencies allowed US soybean processors to squeeze more oil from the crush (relative to the production of soybean meal) when demand for renewable diesel surged, especially as the processing industry dealt with short term constraints on soybean crushing expansion.
Market price changes are another part of the response to a major shift in soybean oil demand. However, understanding how observed price changes are related to the renewable diesel boom is complicated by the multi-product nature of soybeans. An earlier farmdoc daily article (Irwin, 2017) found the boom in US biodiesel production of 2011-2017 did not lead to higher soybean oil prices, the main biodiesel feedstock. Gross margins and price dynamics among the components of the crush remained stable during that period.
Irwin (2017) argued China’s soybean import boom, which paralleled the U.S. biodiesel boom, explained the apparent stability of prices in the soybean complex in the 2010s. Since soybean oil is a joint product that is produced in fairly fixed proportions when soybeans are crushed, China’s soybean import boom necessarily also produced a huge quantity of soybean oil. This large increase in global soybean oil supplies, also boosted by good growing season weather, allowed the US boom in biodiesel production to take place without causing a corresponding surge in soybean oil prices. These earlier findings highlight the important role that the soybean crush plays in understanding the relationship between biomass-based diesel markets and soybean prices.
This article reexamines the dynamics of the soybean crush using more recent price data for the renewable diesel boom period from late 2020 to present. We show that price interrelationships in the soybean complex have changed. The soybean oil share of the value of crush output has become larger and more volatile. Similarly, crush margins, the value of oil and meal less the value of soybeans, have been subject to significant swings. Co-movement in price changes for the three components of the crush – soybeans, oil, and meal – has shifted and the correlation between these price changes has broken down. For soybean industry stakeholders considering the possibility of further growth in biomass-based diesel production due to recent EPA rulemakings, soybean complex price swings in the past five years suggest pricing relationships have yet to find a ‘new normal’.
Source : illinois.edu