More US soybean oil crushing capacity planned in N.D. joint venture

CGB Enterprises and Minnesota Soybean Processors have formed a joint venture to build a soybean processing plant near Casselton, North Dakota, the latest in wave of new soybean crushing capacity projects announced to meet growing feedstock demand for renewable fuels projects.

"North Dakota Soybean Processors, LLC, jointly owned by CGB and [Minnesota Soybean Processors] will own and operate the new facility, which is expected to crush 42.5 million bushels of soybeans in the first year, providing a more competitive and viable market within North Dakota for production that previously left the state," said the companies in a Dec. 22 joint statement.

Construction on the Casselton plant is expected to begin in the spring of 2022, with expectations the facility will be fully operational by 2024, subject to approval from the necessary government regulators as well as approval and incentive approvals.

"This state-of-the-art soybean processing plant is a commitment to North Dakota agriculture. Its strategic location will produce soybean meal for the livestock industry and food grade soybean oil to service the rising demand of food users and also the renewable fuel industry," said Steve O'Nan, Senior Vice President, CGB Soybean Processing in the statement.

For Minnesota Soy Processors, the facility will complement its current operations in Brewster, Minnesota, and provide a domestic market for local farmers, Jeramie Weller, General Manager of the co-operative said in the statement.

Soy oil demand spikes on renewable fuel projects

According to the North Dakota Soybean Council, North Dakota in 2020 produced 190.95 million bushels of soybeans, 71% of which were exported to China and other Asian destinations.

However, US demand for soybean oil has spiked as more renewable diesel and sustainable aviation fuel projects are being developed nationally, and the addition of more soy crushing capacity is likely to reduce exports and redirect oil to renewable fuel feedstock.

Under the US Environmental Protection Agency's Renewable Fuel Standard, many refiners and other biofuel producers looking to cut greenhouse gas emissions to make cleaner transportation fuels are drawing on soybean oil as an accessible feedstock.

So far in Q4, the BO-HO spread has narrowed to average $1.9472/gal from the $2.4215/gal in Q3, as the price of soybean oil has fallen and the price of ULSD has risen, according to S&P Global Platts prices.

The BO-HO spread measures the value of renewable feedstock soybean oil against petroleum-based diesel using CBOT soybean oil and NYMEX ULSD futures contracts.

Move to secure feedstock supply

Renewable fuel producers like Marathon and Chevron have procured feedstocks by teaming up with soybean oil producers to ensure supply as demand for grows.

Earlier this month, Marathon and ADM completed a deal for a joint venture soybean plant in Spiritwood, North Dakota, which will produce 600 million lb/year of refined soybean oil feedstock, enough to supply about 75 million gallons/year of feedstock to Marathon's two renewable projects.

In September, Chevron entered into a joint venture with Bunge, the world's largest oilseed producer, in which it would invest $600 million in Bunge's two plants, located in Illinois and Louisiana, doubling the soy crushing capacity and locking in supply.

Chevron plans to produce 100,000 b/d of renewable diesel and sustainable aviation fuel by 2030, having recently produced its first batch of SAF at its El Segundo, California, facility. Bunge currently supplies soybean oil to the facility.

US soybean oil consumption for biofuels reached a 2021 high of 815 million lb/month in August, before falling to 756 million lb/month in September, according to the most recent Energy Information Administration data.

In 2021, EIA data estimates renewable diesel and other biofuel production capacity was 911 million gallons/year, which is set to rise in 2022 as several RD and SAF projects come online in 2022, including those in Oklahoma, Montana and Wyoming.

Platts Analytics forecast in November it expects full year US soybean oil consumption of 8.6 billion lb, with 35% of total production or 24.4 billion lb going for biofuel feed. For the 2021-2022 marketing year, Platts Analytics forecasts soybean oil production rising to 26.1 billion, with 12 billion lb going toward biofuels.