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Soy-Based Biofuels No Threat to Food Production

In a previous article titled “Renewable Diesel from Soybeans” that was posted on this website in Feb. 2023, the case was made that soybean oil is now and is projected to be the primary feedstock for renewable diesel [RD] production. This is because, of all the crops that provide oilseeds for RD production, soybeans occupy by far the largest acreage in the U.S. Renewable diesel is classified as a biofuel, but as explained in the above-linked article, it is quite different from biodiesel that is processed from soybean oil.

In Nov. 2022, a report titled “Food and Fuel: Modeling Food System-Wide Impacts of Increase in Demand for Soybean Oil” by Dr. Jayson Lusk of Purdue Univ. was prepared for the United Soybean Board [USB]. Dr. Lusk used economic models to develop projections/estimations of just how the increased demand for soybean oil to be used for processing biofuels will affect the food processing sector that uses soybean oil. A summary of the study results can be accessed here. Pertinent points from the report follow.

•    The share of soybean oil going into biofuel production in the U.S. has quadrupled over the past decade. The price for crude soybean oil has approximately doubled since the fall of 2020.

•    The overall objective of the research that provides this analysis was to evaluate whether or not the increased use of/demand for soybean oil needed for the production of biofuels has contributed to the rising retail prices for food products that are purchased by consumers.

•    The following points were determined from this research. 1) The cost of wholesale soybean oil is only a small part of the overall cost of producing retail food items. 2) The increased amount of soybean oil used for biofuel production has not necessarily come at the expense of soybean oil used for food. 3) Soybean oil is jointly produced with soybean meal during processing, and this results in an increased quantity of soybean meal that far exceeds the quantity of oil produced from the processing.

•    Equations used in the economic model indicate a 20% increase in the quantity of soybean oil that will be demanded for use in biofuel production.

•    The expanded crush [i.e. processing] of soybeans for oil creates an increased availability of soybean meal used in animal diets, and this results in a lower price for soybean protein used in animal feed. This decrease in animal protein price resulted in 0.16%, 0.13%, 0.06%, 0.02%, and 0.01% decreases in retail prices for eggs, chicken, pork, dairy products, and beef, respectively.

•    The projected retail price increases for food items as a result of the increased demand for soybean oil needed to produce biofuels are 4.41%, 0.82%, and 0.16% for salad and cooking oil, margarine, and baking and frying oil plus other foods containing oil, respectively. These price increases are much smaller than the estimated 8.17% price increase for crude soybean oil.

•    While the increased demand for soybean oil for uses other than food processing may contribute to the rising price of soybean oil-based food products, the increased availability of soybean meal resulting from the increased soybean crush drives down the cost of soybean protein used in animal diets. This will offset the effect of this increased demand for soybean oil on the consumer price index [CPI], which is estimated to be only +0.05%.

•    Overall, the conclusions drawn from this research are that 1) the rise in demand for soybean oil has had little effect on the CPI, and 2) the increased demand for soybean oil to meet the demands of the biofuel industry has had limited impact on the rise in retail food prices at the grocery store. Non-farm factors such as transportation, processing, packaging, and retail costs associated with food processing in the U.S. far outweigh the costs of raw farm commodities such as soybean oil that are used in the production of the food purchased by consumers.

Composed by Larry G. Heatherly, Nov. 2023,