The US soybean sector needs assurances that the export and biofuels markets will remain viable, and a return to the 2016-20 (Trump) regime could increase overall market uncertainty, said Mac Marshall, independent strategic advisor, in an interview to S&P Global Commodity Insights.
“Exports – increasingly of soybean meal – and domestic growth in renewable diesel and sustainable aviation fuel (SAF) production are critical to the economic viability of the US soybean sector,” Marshall, the former vice president of market intelligence at United Soybean Board said, suggesting that a return to the 2016-20 regime could bring uncertainty to the two areas.
The Energy Information Administration forecasts SAF production in the US to increase from around 2,000 barrels per day in 2023 to nearly 30,000 b/d in 2024, “if all announced capacity additions come on line,” according to its latest short-term energy outlook.
The EIA expects SAF to meet 100% of US aviation fuel demand by 2050, with jet fuel demand rising from 1.6 million b/d in 2023 to over 2 million b/d in 2050.
Similarly, the US Department of Agriculture projects MY 2024-25 domestic soybean meal production at 51.78 million mt, rising 5.3% year over year, and exports at 15.88 million mt, up 8.7% year over year, according to the latest World Agricultural Supply and Demand Estimates report Oct. 12.
Trade restrictions, tariffs a concern
“The prevailing rhetoric around trade restrictions, tariffs, and retaliation naturally gives me great concerns – the 2018-20 trade war was disastrous for the farm economy,” Marshall said.
In MY 2018-19, US soybean exports dropped 17.9% year over year to 47.68 million mt, while falling another 4.15% year over year to 45.7 million mt in MY 2019-20, according to the USDA.
“The two reasons we saw a rebound in soybean prices and profitability were China resuming buying soybeans in large volumes starting in late 2020; and enthusiasm about the growth in domestic biofuels production and associated increased demand for soybean oil,” Marshall added.
In MY 2020-21, US soybean exports increased about 35% year over year to 61.67 million mt, while exports to China rose 117.4% year over year to 35.36 million mt, making up 57.28% of the total exports, according to the USDA.
The USDA projects MY 2024-25 US soybean oil production at 12.93 million mt, up 5.12% year over year, and domestic demand at 12.79 million mt, up 4.07% year over year.
The US season average farm price for soybeans has seen a consistent upward trend in the years following 2020-21, with the average price received by farmers at $10.8/bushel in MY 2020-21, $13.3/bu in MY 2021-22 and $14.2/bu in MY 2022-23, before falling to $12.5/bu in MY 2023-24 estimates, and $10.8/bu in MY 2024-25 projections.
Challenging time for soybeans
“As presently implemented, the Clean Fuels production credit in the Inflation Reduction Act (IRA) provides incentives for biofuels producers to source imported feedstocks like used cooking oil and tallow from regions of the world subject to deforestation and environmental degradation at the expense of using domestically produced feedstocks like soybean oil,” Marshall said.
“In the past 2 years the US has imported more used cooking oil (primarily from China) and tallow (primarily from Brazil) than in the prior 20 years combined, and this incentive imbalance has adversely impacted farmers as the influx of foreign feedstocks has driven down the price of soybean oil and the soybeans from which it is produced,” he continued.
Platts, part of S&P Global Commodity Insights, assessed SOYBEX FOB New Orleans for December shipment at $412.82/mt Oct. 25, down $1.28/mt on the day.
The Platts Oct. 25 SOYBEX FOB New Orleans assessment was $93.32/mt below the year-ago price of $506.14/mt Oct. 25, 2023, and $179.58/mt lower than $592.4/mt on Oct. 25, 2022.
In 2023, the US imported a net total of 718,000 mt of used cooking oil from China – compared with none over 2020-2022, according to the American Soybean Association.
The supplies were boosted by the Biden administration’s Inflation Reduction Act, which promoted the use of clean energy, and extended tax credit incentives for the production of SAF and biodiesel.
“Farmer sentiment is at multiyear lows due to the economic environment and continued uncertainty around how and to what extent the farm sector can contribute to the energy transition further exacerbates the negative outlook,” Marshall said.
“Getting assurances in upcoming energy policy, such as domestic feedstock requirement in section 45Z of the IRA would be extremely welcome for US producers who face enough economic uncertainty with weather and commodity price volatility alone,” he added.
Section 45Z of the IRA incentivizes the production of low-emissions transportation fuels through tax credits, and extends to low-carbon ethanol, biodiesel, and sustainable aviation fuel.
“This is a challenging time for the soybean industry,” Marshall remarked.
