Bountiful Soybean Harvest Ready to Meet Surging Oil Demand

October 06, 2017 12:58 AM

The latest projection released by the United States Department of Agriculture (USDA) promises a plentiful supply of soybeans through 2018 and projections show crops breaking records1.

In its September 12 report, the USDA increased the soybean yield by 0.5 bushels per acre while keeping harvested acreage unchanged. This results in a projection of the soybean crop at 4,431 million bushels, almost 3 percent greater than last year’s previous record1. In its August World Agricultural Supply and Demand Estimates (WASDE) report, the USDA projected soybean prices to trade in a range with a midpoint of $9.20 per bushel, about the same as the previous two years2.

The prospects for soybean oil prices seem to be more robust. On August 22, the United States Department of Commerce imposed duties on Argentinian and Indonesian biodiesel imports that will probably have the effect of immediately halting imports of these products3.

In its July 27, 2017 blog, Genscape points out that “for every additional 100 million gallons of produced biodiesel in the U.S., the rise in soybean oil demand is about 400 million pounds, statistically speaking.”4 This undoubtedly drove the USDA to increase soybean oil demand for biodiesel feedstock in 2017-18 by 550 million pounds to a record 7 billion pounds in the most recent WASDE report4.

Even though soybean prices seem to be stagnant at fairly low levels, the USDA expects soybean oil prices in 2018 to be some 6 percent above this year’s prices and 15 percent above last year’s prices, according to its latest WASDE report2. This would imply a price of 42.5 cents per pound for RBD soybean oil, delivered East Coast.

References
1 “Crop Production.” https://www.usda.gov/nass/PUBS/TODAYRPT/crop0917.pdf United States Department of Agriculture. September 12, 2017,
2 “World Agricultural Supply Demand Estimates.” https://www.usda.gov/oce/commodity/wasde/latest.pdf United States Department of Agriculture. September 12, 2017.
3 The National Biodiesel Board. “Commerce Department Rules in Favor of US Producers in Trade Dispute.” Biodiesel Magazine. August 22, 2017. http://www.biodieselmagazine.com/articles/2516127/commerce-dept-rules-in-favor-of-us-producers-in-trade-dispute
4 “Analysis of the U.S. Biodiesel and Renewable Diesel Market.” Genscape. July 27, 2017. http://www.genscape.com/blog/analysis-us-biodiesel-and-renewable-diesel-market-genscape-and-playmaker-strategies

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Richard GallowayAbout the Expert

Richard Galloway is president of Galloway and Associates, LLC, a business consulting firm serving domestic and foreign agricultural processing, vegetable oil refining, biodiesel and grain handling industries. Galloway is a consultant to the QUALISOY Board, a collaborative effort among the soybean industry to help market the development and availability of trait-enhanced soybean oils, including high oleic soybean oil. Read More...