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Renewable Diesel from Soybeans

Use of Renewable Diesel (RD–also known as hydro-treated vegetable oil) has become a hot topic in this country because of its capability to replace petroleum-based diesel fuel. This biofuel is quite different from biodiesel because it is produced by a different production process that yields a hydrocarbon product that is molecularly identical to standard fossil fuel diesel. Thus, RD can be used in any diesel engine with no required modifications to that engine–i.e., it can be used as a “drop-in” fuel. Also, it does not have to be blended with petroleum-based diesel to maintain performance in standard diesel engines. RD emits significantly less emissions than standard fossil fuel diesel and gasoline. It is easier to refine than gasoline, has the potential to power myriad commercial vehicles, and can replace coal and other fossil fuels for generating electrical power. Current biofuel producers are planning expansion principally using soybean oil as a feedstock.

A Sept. 2022 report titled “Renewable Diesel Projected to Turbo Charge Biofuel Growth” by K. S. Zuckerberg, Lead Economist with CoBank, provides positive news for U.S. soybean producers as they look for new markets for their soybeans. Key points from that report follow.

•    Biofuels such as RD are liquid fuels that are produced from plant feedstocks, and are being promoted to reduce the use of fossil fuels.

•    Consumption of energy from renewable sources has increased across the globe, and this will likely continue as more governments mandate a shift to less carbon-intensive energy sources.

•    All current and proposed RD projects will require the U.S. to vastly increase production of the feedstocks used for RD production, and the most available and important feedstock source will be soybean oil.

•    A key element of the 2022 Inflation Reduction Act that was enacted by the U.S. Congress is the subsidizing of private sector investment in domestic production of clean energy.

•    Ethanol (alcohol fuel produced from corn feedstock) and biodiesel (diesel fuel made by processing vegetable oils and other fats) are biofuels that have to be blended with petroleum gasoline and petroleum diesel, respectively. Since RD is chemically similar to petroleum diesel, it does not have to be blended with traditional petroleum diesel. It can be used in any diesel engine with no required modifications to that engine–i.e., it can be used as a “drop-in” fuel.

•    Electric vehicle sales are increasing; however, production of batteries needed to power these vehicles is being hampered by high elemental lithium prices and supply chain issues.

•    RD is a “greener” fuel (carbon intensity score of 41) than petroleum diesel (carbon intensity score of 90), and thus produces lower greenhouse gas emissions.

•    Of all the crops that can provide oilseeds for RD production, soybeans occupy by far the largest acreage in the U.S. Thus, it is the crop that presently is the primary source of feedstock for U.S. RD production.

•    Growth in U.S. RD production is expected to rise from today’s production of approximately 1 billion gallons to 6.5 billion gallons by 2030, and this will require 3.4 billion new bushels of soybeans. Using a projected U.S. soybean yield estimate of 51.9 bu/acre, and assuming the stoppage of all soybean exports (projected to be 2.5 billion bushels in 2030), this would require an additional 17.9 million U.S. soybean acres to produce the 927 million bushel shortfall needed to meet the projected RD demand.

•    Acres that would have been devoted to corn will likely be the primary source of new soybean acres needed to meet projected RD demand. This may not be an issue if electric vehicle adoption reduces the need for corn-based ethanol (historically, ~35% of U.S. corn production has been used for ethanol production), which in effect would lower the needed U.S. corn acres.

According to information in an article titled “Economist’s Angle: Soybean Processing Growth is Crushing It” by Scott Gerit, ASA Chief Economist, the soybean processing industry plans to grow significantly over the next few years. Much of this planned expansion is in response to the anticipated growth in demand for RD. Announced plans for 23 new or expanded crushing plants in the U.S. would increase crush by 34%, and would add about 750 million bushels per year in crush capacity. Of course, this planned expansion of U.S. crush capacity that is based on growing RD production will only come about as the RD industry grows. The locations, capacities, and timelines of these planned U.S. plant expansions are presented graphically in the above-linked article.

Since soybean oil is now and is projected to be the primary feedstock for RD production, U.S. soybean producers are in a position to play a major role in reducing greenhouse gas emissions by providing the raw material for producing this fuel that has a lower carbon footprint vs. petroleum diesel. This will result in an increased demand for soybeans, and will likely cause a shift to more soybean acres in this country in order to meet this increased demand for RD feedstock. All of this should be great news for all U.S. soybean producers.

Composed by Larry G. Heatherly, Nov. 2022, larryh91746@gmail.com