Demand for soybean oil as a feedstock in the production of renewable diesel is rising as the U.S. aims to increase the adoption of cleaner-burning fuels. Renewable diesel is the preferred replacement for traditional diesel, and U.S. production is predicted to increase sharply in the years ahead.
To meet the growing demand for soybean oil, U.S. processors are ramping up their production capacity, expected to increase by 23 percent over the next three years. While processors have benefited from record-high profit margins in recent years, margins will likely moderate. A new report from CoBank says multiple years of record margins have left processors prepared to weather the inevitable margin downturn.
However, overbuilding U.S. crush capacity, combined with sustained levels of low processing margins, could threaten the viability of new, high-cost plants. The CoBank report says new crush plants built at higher costs and interest rates will have much higher breakeven costs.
-NAFB