Biodiesel production has pushed U.S. soy oil prices higher than they were during the pre-biodiesel era, according to a new study.
The research, commissioned by the Minnesota, Nebraska, and North and South Dakota soy checkoffs, found that biodiesel contributed to a $15 billion increase in soy-oil revenues between 2006 and 2012. This has also raised the price of soybeans by $0.74 per bushel, according to the study.
It appears that biodiesel demand also helped offset the effects of a drop in food applications.
As biodiesel production edged upward, the amount of soy oil used in the food industry slid down. Soy oil use for biodiesel increased from 670,000 pounds in 2005 to 4.1 billion pounds for 2012. During that period, U.S. soy oil use in food applications declined by 3.6 billion pounds.
According to one USB farmer-leader, that was no accident.
“When trans-fat labeling decreased the use of soy oil for food applications, specifically cooking oils, it created a huge drag on the soy-oil price due to surplus,” said Lewis Bainbridge, United Soybean Board (USB) secretary and a soybean farmer from Ethan, S.D.
“We generated a huge stockpile, and that’s when the demand for biodiesel started, which helped decrease the glut of soy oil.”
With energy markets now competing with the food sector for vegetable oil, soybean prices and energy prices have statistically linked, creating a floor price for soy oil.
“As the demand for biodiesel continues to grow, it creates demand for our soy oil and increases its value,” says Bainbridge. “Farmers now see what soy oil is doing for their return on investment and can use it as a hedge for their fuel costs.”
Biodiesel also supports animal agriculture. As more soy oil is processed for biodiesel production, more soy meal is available for feed, in turn, lowering the cost of soy meal and the price of rations for poultry and livestock farmers. In fact, the study shows biodiesel production lowers soy meal prices by as much as $25 per ton.
For more from the soybean checkoff, see http://www.unitedsoybean.org/.
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