Impact of the U.S. Biodiesel Industry on the U.S. Soybean Complex

Topics: Biodiesel, Soybean, Vegetable oils Pages: 47 (15248 words) Published: June 13, 2013
Impact[Insert Title] [Year] of the U.S. Biodiesel Industry on the U.S. Soybean Complex

Minnesota Soybean Growers Association
Informa Economics Phone: 901.766.4669 www.informaecon.com

Prepared for:

December 2012

Table of Contents
I. EXECUTIVE SUMMARY ................................................................................................................................................... 1 II. INTRODUCTION .............................................................................................................................................................. 4 A. BIODIESEL INDUSTRY BACKGROUND .................................................................................................................................. 4 III. THE SOYBEAN COMPLEX PRIOR TO THE EMERGENCE OF THE U.S. BIODIESEL INDUSTRY ............................. 9 A. IMPACT OF LARGE SOYBEAN OIL INVENTORIES ON THE U.S. SOYBEAN COMPLEX .................................................................. 9 B. BIODIESEL SHIFTED THE STRUCTURE OF SOYBEAN OIL DEMAND AND PRICES ..................................................................... 12 C. SOYBEAN OIL USE FOR BIODIESEL HELPED OFFSET THE IMPACT OF TRANS-FAT LABELING TO THE CONSUMPTION OF SOYBEAN OIL ................................................................................................................................................................................... 13 D. KEY TAKEAWAYS ........................................................................................................................................................... 18 IV. BROAD IMPACTS OF THE U.S. BIODIESEL INDUSTRY ON THE U.S. SOYBEAN COMPLEX ............................... 19 A. BIODIESEL RESULTED IN INCREASED DEMAND FOR SOYBEAN OIL IN THE U.S. .................................................................... 19 B. THE PRICE OF SOYBEAN OIL BECAME CLOSELY LINKED TO THE PRICE OF DIESEL............................................................... 20 C. BIODIESEL RESULTED IN HIGHER SOYBEAN OIL PRICES AND A POSITIVE TO THE SOYBEAN COMPLEX ................................... 23 D. THE SHARE OF SOYBEAN OIL AS BIODIESEL FEEDSTOCK IS NOT A FACTOR IN THE CO-MOVEMENT OF ENERGY AND SOYBEAN OIL PRICES........................................................................................................................................................................ 27 E. INCREASED SOYBEAN OIL PRICES AND THE CORRESPONDING EFFECT ON SOYBEAN AND SOYBEAN MEAL PRICES ................ 29 F. KEY TAKEAWAYS............................................................................................................................................................ 31 V. THE BIODIESEL INDUSTRY ALSO INFLUENCED SECTORS OUTSIDE OF THE SOYBEAN COMPLEX ................ 32 A. BIODIESEL RESULTED IN INCREASED PRICES FOR OTHER VEGETABLE OILS ........................................................................ 32 B. BIODIESEL RESULTED IN INCREASED PRICES FOR ANIMAL FATS AND GREASES ................................................................... 33 C. BIODIESEL CREATED A PROFITABLE MARKET FOR INDUSTRIAL GRADE CORN OIL EXTRACTED FROM DDGS ......................... 36 D. KEY TAKEAWAYS ........................................................................................................................................................... 38 VI. FRAGILITY OF CURRENT BIODIESEL MARKET DRIVERS ...................................................................................... 39 A. CURRENT RENEWABLE FUELS STANDARD & IMPLICATIONS OF POTENTIAL ANNUAL ADJUSTMENTS ....................................... 39 B. STATE-LEVEL BIODIESEL MANDATES ............................................................................................................................... 43 (a) Adjustment to the RFS2...
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