A dramatic growth in renewable diesel production and capacity in the USA is creating a shift in domestic markets and foreign feedstock trends, according to a World Grain article citing a new United States Department of Agriculture (USDA) report.
Although production growth was expected to continue, the rate would be highly dependent on federal and state policies, availability of feedstocks and sustained US soyabean meal export gains, the 14 June report said.
According to the USDA’s Foreign Agricultural Service (FAS) report, policies have driven the rapid production growth, particularly the California Low Carbon Fuel Standard (LCFS) that offsets higher biomass-based diesel production costs through a carbon credit for meeting emission targets. This had driven renewable diesel consumption in California.
From 2020-2023, growth in California consumption had been more than double the consumption growth in the rest of the USA, the report said.
Biomass-based diesel accounted for about 60% of the California diesel pool while the volume in the rest of the USA was in the low single digits.
Increased renewable diesel production had boosted feedstock demand, leading to dramatic increases in US imports of vegetable oils and animal fats, FAS said.
For example, canola oil imports had surged, with the USA increasing its share of Canadian canola oil exports from 50%-60% to 91% in 2023.
“As expected, the collective imports for animal fats and vegetable oils have grown drastically in alignment with the growth of renewable diesel,” the FAS said. “In fact, US import values of all animal fats and vegetable oils more than doubled from 2020 to 2023.”
According to the report, US agricultural export market dynamics were also shifting, with a drop in soyabean exports due to competition with Brazil and reduced demand growth in China.
However, renewable diesel growth was partially offsetting falling exports by stimulating domestic soyabean consumption, the FAS said. As a direct effect of increasing renewable diesel production, US soyabean crushing was expected to reach record levels for the fourth consecutive year.
US soyabean oil premiums were so far above global vegetable oil prices that US exports had dropped, with the USA becoming a net soyabean oil importer for the first time in 2023, the report said.
Soyabean crushing had surged due to oil demand, leading to increased soyabean meal supplies and record meal exports in 2022/23, the FAS said.
With US soyabean meal exports forecast at a record level for the third consecutive year, increased supplies and higher exports were expected to continue in 2024/25.
The USA was expected to increase its share of global soyabean meal exports from the typical 18% to 21% in 2024/25.
Looking ahead, increasing renewable diesel production could impact the sector further.
However, policy changes and could feedstock availability could influence any potential impact, FAS said.
The impact on soyabean meal production, consumption and trade was also uncertain as a large part of the growth in exports was due to reduced competition from Argentina.
When Argentine production recovered to normal levels, global demand was unlikely to be high enough to expand US exports, the FAS said.
“Even if the USA can capture all global soyabean meal import growth, US crush and renewable diesel growth could be limited by the ability to find an outlet for surplus soyabean meal,” the organisation said.
“Based on global demand for soyabean meal, soyabean oil cannot continue to fuel renewable diesel production growth at current rates during the next few years without major changes to global soyabean meal demand, shifts in exporter market shares or lower supplies in other exporting countries.”
Meanwhile, US production of hydrotreated vegetable oil (HVO) has increased to the extent that it accounts for a larger share than biodiesel, according to a report by Germany’s Union for the Promotion of Oil and Protein Plants (UFOP) citing US Energy Information Administration (EIA) data.
According to the 13 June report, around 19.9M tonnes of biodiesel including HVO were produced in the USA in 2023.
At 7.3M tonnes, biodiesel production accounted for only 37% of total production, while HVO’s share increased to 63% at 12.6M tonnes.
According to research by Agrarmarkt Informations-Gesellschaft, HVO production in the USA totalled 301,000 tonnes in 2011, while biodiesel production totalled 4.2M tonnes.
Since 2012, the share of renewable fuels has grown steadily, according to the report.
While HVO production has increased rapidly since 2020, the trend for biodiesel in the USA has been stable to slightly downward since 2018.
The UFOP said it expected a similar trajectory in Germany and the European Union (EU) as although there had been almost no more investments in plants for biodiesel production, mineral oil groups were investing in HVO facilities in Italy, France and the Netherlands.
At the time of the report, investments in HVO plants were not planned in Germany, although refineries to co-process waste oils were in the pipeline.
