Source: FARM DOC DAILY, UNIV. OF ILLINOIS, 9/14/17


Biodiesel production and consumption in the U.S. boomed in recent years due to rising RFS mandate requirements. However, no evidence was found in a farmdoc daily article last week that the boom in biodiesel led to a boom in soybean oil prices, the main biodiesel feedstock. China's soybean import boom, which paralleled the U.S. biodiesel boom, was suggested as the explanation. Since soybean oil is a joint product that is produced in fixed proportions when soybeans are crushed, China's soybean import boom necessarily also produced a huge quantity of soybean oil. This large increase in global soybean oil supplies, also boosted by good growing season weather, allowed the U.S. boom in biodiesel production to take place without causing a corresponding boom in soybean oil prices. This highlights the important role that the soybean crush plays in understanding the relationship between biodiesel and soybean oil prices. The purpose of this article is to analyze the soybean crush in order to provide additional evidence regarding the soybean oil price impact of the U.S. biodiesel boom. This continues the recent series of farmdoc daily articles that examine the role that biodiesel plays with respect to compliance with RFS mandates.

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