Rising vegetable oil prices and tight supplies lead American Bakers Association to call for lower RFS biodiesel levels.

Jacqui Fatka, Policy editor

November 4, 2021

4 Min Read
Soyoil soybeans GettyImages-466871402.jpg
SOY OIL CRUNCH: Food industry groups have waged claims that there’s a crunch on the supply of soy oil available because it is being diverted to biodiesel and a burgeoning renewable diesel market. ASA and NBB counter that record soybeans supplies are available. Getty Images

In a discussion over supply chain issues, the American Bakers Association claim that vegetable and soy oil prices have soared and suggested the Environmental Protection Agency should lower blending requirements in the RFS. Soybean supporters pushed back, saying there are ample supplies of soy oil to meet food and fuel demand.

During a Nov. 3 House Agriculture Committee hearing on supply chain challenges, Ed Cinco, director of purchasing for Ohio-based Schwebel’s Baking Company, testified that the demand for soy oil and other vegetable oils has exceeded the current domestic supply. He cited that several factors influenced the supply availability including the 2020 drought, lower than expected projected plantings in 2021 and the RFS’s mandated levels for biodiesel.

For his bread company, he says he buys soybean oil based on the commodity market and on the basis adding in the transportation and refining costs. Last November, he typically could buy soy oil for 10 cents per pound. Now it’s 54 cents/lb. Others can’t even get quotes from vendors because they don’t have the capacity to store product. He’s heard the shortage will be for at least the next six months while refining capacity is at a premium.

“Economists report that vegetable oil prices have tripled in the past 12 months and into 2022,” his written testimony stated. “The increase in biodiesel has also reduced the processing capacity available for vegetable oils. Additional capacity is being created but is not projected to go online until 2023.”

He says EPA can use its statutory authority to consider food and commodity prices and the impact to the supply chain when setting the 2021 and 2022 Renewable Volume Obligation mandates for biodiesel and renewable diesel.

Rep. Randy Feenstra. R-Iowa, pushed back on Cinco’s claims that the RFS is contributing to higher costs for soybean oil, arguing the facts show production activities are not contributing to a recent temporary increase in soybean oil prices.

“Over the last decade, soybean production and processing capacity has grown dramatically,” Feenstra said. “In fact, the October WASDE report forecast soybean production at 4.4 billion bushels -- that’s up 74 million bushels from the year before based on higher yields. While our farmers are projected to produce a record crop this year, the biodiesel and renewable diesel industry are using approximately the same amount of soybean oil that they did compared to last year at this time.”

In a recent editorial from American Soybean Association CEO Stephen Censky, he says processors are gearing up to process more soy and assure adequate soy oil is available for food, feed and fuel. At least seven new oilseed processing plants are under development, and soybean oil production by the domestic processing industry is projected by USDA to reach a record level this year—on top of a 26% growth in supply over the last 10 years.

The National Biodiesel Board agrees, stating that new demand is sending the right market signals to both soybean farmers and soybean crushers, leading to increased value for farmers, processors and rural economies, which in turn leads to more protein for livestock production and oil for food manufacturers.

Donnell Rehagen, CEO of the National Biodiesel Board, said, “Biodiesel and renewable diesel production consistently support 13% of the value of every U.S. soybean bushel. Sustainable growth in our industry is also supporting new investments in domestic soybean crush capacity, which will translate into additional value for U.S. farmers and rural economies. A misguided attack on the Renewable Fuel Standard will simply undercut a valuable, stable market for the record harvest that soybean growers are achieving this year.”

In 2020, biodiesel production added close to $6 billion in U.S. farmers’ return on soybeans, NBB noted.

Kevin Scott, soy grower from Valley Springs, South Dakota and American Soybean Association president said, “There is currently not a soy oil supply shortage, nor is one envisioned by year-end, but there are in fact very real supply chain challenges impacting U.S. agriculture.”

Related: Supply chain issues hitting all segments of ag

The chief executive officers of more than a dozen agriculture groups including ASA recently identified the key supply issues affecting agriculture and related industries. Those concerns include labor, barge shipments, ports and shipping containers, trucking and rail freight, fertilizer, chemical inputs, energy, equipment and parts, and water availability.

Recent supply chain challenges related to transportation and infrastructure, input supply, and labor continue to negatively impact soybean growers and the agricultural industry as a whole, ASA noted.

 

About the Author(s)

Jacqui Fatka

Policy editor, Farm Futures

Jacqui Fatka grew up on a diversified livestock and grain farm in southwest Iowa and graduated from Iowa State University with a bachelor’s degree in journalism and mass communications, with a minor in agriculture education, in 2003. She’s been writing for agricultural audiences ever since. In college, she interned with Wallaces Farmer and cultivated her love of ag policy during an internship with the Iowa Pork Producers Association, working in Sen. Chuck Grassley’s Capitol Hill press office. In 2003, she started full time for Farm Progress companies’ state and regional publications as the e-content editor, and became Farm Futures’ policy editor in 2004. A few years later, she began covering grain and biofuels markets for the weekly newspaper Feedstuffs. As the current policy editor for Farm Progress, she covers the ongoing developments in ag policy, trade, regulations and court rulings. Fatka also serves as the interim executive secretary-treasurer for the North American Agricultural Journalists. She lives on a small acreage in central Ohio with her husband and three children.

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