Biodiesel’s impact on soybean oil prices lower than previously thought

An agriculture economist says biodiesel production has had less impact on soybean oil prices than previously thought.  The impression was that the U.S. biodiesel production boom following the establishment of the Renewable Fuel Standard would put upward pressure on the price of soybean oil, according to Scott Irwin, the Laurence J. Norton Chair of Agricultural Marketing at the University of Illinois.

“And if you look at the data, much to our surprise, that definitely hasn’t happened,” said Professor Irwin, in an interview with Brownfield Ag News Friday.

Part of the reason it didn’t happen, said Irwin, is because of high Chinese demand for soybean meal.  The extra soybean crush necessary to produce the soybean meal has resulted in a corresponding glut of soybean oil.

“Basically, there’s been, surprisingly, more than enough soybean oil and other fats and oils to allow this huge U.S. biodiesel boom,” said Irwin.  “And actually, soybean oil prices have fallen substantially since 2011.”

Irwin maintains that it is soybean meal that is the biggest part of what determines the value of whole soybeans.

“The bottom line is that soybean meal is still king when it comes to the value of soybeans,” said Irwin, “which means that what happens to those soybean exports to China is still the most important determinant of soybean prices around the globe and the bottom line for U.S. producers.”

Irwin poses the question of what would have happened to soybean oil prices and the overall soybean market if it weren’t for the Renewable Fuel Standard that resulted in the biodiesel production boom.

“What would have soaked up all of that soybean oil that was being produced,” he asks.  “It would have been used somewhere, but at a much lower price.”

AUDIO: Scott Irwin (7 min. MP3)


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