A surge in imports of used cooking oil (UCO) and other biofuel feedstocks is having an impact on the US soyabean sector, Farm Progress reported from a Bloomberg report.
The increase in UCO imports was hitting soyabean processors’ profits, forcing them to slow down production and affecting expansion plans, the 27 April report said.
Faced with weaker demand, companies were starting seasonal maintenance work earlier than usual and closing plants for longer periods, Farm Progress wrote.
According to soyabean marketing and consulting company CrushTraders, around 20M bushels (540,000 tonnes) of crushing capacity were offline across the Corn Belt in April – a record for the month – including at major plants operated by agribusiness giants Archers Daniels Midland (ADM) and Cargill, with at least 10M bushels (270,000 tonnes) expected to be turned off in May.
Although government incentives had increased demand for cleaner-burning fuels and billions of dollars had been invested in the expansion of processing soyabeans into oil, imports of alternatives such as tallow, UCO and canola oil were impacting soyabean oil’s market share, the report said.
The increased competition was also raising questions about the capacity that would be needed going forward, Farm Progress wrote.
“Those projects that were well underway are going to continue and get completed but anything that was proposed or in early stages, we’ve seen a number of those put on hold,” Bunge global chief financial officer John Neppl was quoted as saying in a conference call with analysts on 24 April.
In January, soyabean oil accounted for 32% of the feedstocks used to produce biodiesel, down by 44% on the previous year and a record low. This was partly due to the fact soyabean oil was not competitive compared to lower cost alternative sources which also had lower carbon-intensity scores, making them eligible for higher subsidies, the report said.
Meanwhile, the number of renewable diesel plants was increasing, totalling 539 in January, up from 384 the previous year.
According to agricultural consultant Gordon Denny, a former procurement director at Bunge, there are 21 outstanding projects to expand soyabean processing capacity in the USA.
Of those, five projects – which would add 495,000 bushels/day in extra processing capacity – were due to start production this year and would compete for the new crop that would begin to be harvested in October.
“This increase in crush capacity, plus the use of other feedstocks to produce renewable diesel, are creating a … lack of demand for soyabean oil,” Denny said.
Bunge’s Neppl said the Environmental Protection Agency should review its rules – part of the Renewable Fuel Standard (RFS) aimed at curbing climate-harming greenhouse gases and boosting US energy security – on how many gallons of biofuel refiners were mandated to add to the US petrol mix.
After reaching decade-high levels in 2022 and 2023, crushing margins were further pressured by rising soyabean oil stocks and Argentina’s return to the export market following a historic drought, Farm Progress wrote.
Competition was set to increase later in the year during the harvest, when more crushing plants would start operating, the report said.
As a result, companies were weighing up their options on how much capacity to bring back online.
