Column: U.S. rush for renewable diesel may ignite fresh food fight

LITTLETON, Colo. Nov 8 (Reuters) – U.S. trucking and aviation firms are on track to use more renewable diesel than biodiesel for the first time by 2022, marking a milestone not only for the domestic fuel sector but also global edible oil markets.

Although renewable diesel and biodiesel are made from the same edible oils and animal fats, different production methods result in unique product characteristics that have secured renewable diesel’s status as the world’s fastest growing biofuel. .

Biodiesel is typically a synthetic blend. It can only be added to the diesel pool in limited quantities due to its tendency to freeze at low temperatures and damage rubber seals and tubes.

However, renewable diesel is chemically similar to petroleum-based diesel – so it can be used instead of or alongside conventional diesel in any quantity desired by end users.

US renewable diesel consumption vs biodiesel

Renewable diesel also produces fewer emissions than biodiesel and regular diesel. That makes it attractive to logistics firms and other companies looking to lower their supply chain pollution levels.

PIPE BREAKS

In addition to reducing emissions – by about 4.2% for carbon dioxide from the same level of conventional diesel, according to the United States Department of Energy – the ability of renewable diesel to be used as a fuel of ” drop-in” on all diesel engines also makes it attractive. businesses involved in fuel production, transportation and storage.

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US renewable diesel production capacity has increased, growing by more than 90% by 2022 alone to 2.1 billion gallons, from 11 facilities spread across the US Gulf Coast and states in the west, data from the US Energy Information Administration (EIA) show.

That compares to a total biodiesel capacity of less than 2.1 billion gallons at 72 plants spread across the United States.

US diesel production capacity vs biodiesel

Further increases in renewable diesel production are expected in the near term, with the EIA projecting capacity to rise to 5.1 billion liters per year by 2024, from less than 1 billion in 2020.

BIG THANKS

That rapid increase in heft performance will pose a major challenge to key renewable diesel markets, particularly soybean oil in the United States.

Biofuel production now accounts for more than 40% of total US soybean oil demand. But that share of consumption looks set to grow further as production of renewable diesel continues.

US soybean oil consumption for biofuel production versus other uses

Such a high level of sustained demand for soybean oil is likely to have serious implications for major U.S. crop markets, as soybeans compete with corn for production space on prime farmland.

At the latest harvest, US soybean acreage was 2.3 million acres larger than corn — the largest soybean acreage over corn in four seasons.

US farmers tend to rotate corn and soybeans frequently to manage soil health, so there is a risk that soybean acreage could decline next season unless soybean prices give farmers a strong incentive to expanding soybean areas at the expense of corn.

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Current crop prices favor corn slightly over soybeans. However, the key time in making final acreage decisions for 2023 is next year, so there is still time for prices to change to support more soybean acreage.

BIG CONGRATULATIONS

Although most US renewable diesel is produced domestically, more than a third was exported by 2021 as US fuel producers undercut the growing global market.

Most of the recent shipments come from Singapore, which is home to one of the world’s largest oil refineries and a major commercial hub for palm oil, EIA data show.

Other major exporters of renewable diesel include Finland and the Netherlands, although both countries have increased their domestic use of renewable diesel in recent years, leaving little money for exported.

Singapore looks poised to remain a steady supplier of renewable diesel as Neste ( NESTE.HE ), oil major Shell ( SHEL.L ) and other firms run plant expansions in the island state.

World edible oil prices in US dollars per ton

However, increased renewable diesel production and exports from Singapore are likely to directly affect the market for palm oil – the world’s most traded edible oil and trend a staple of cooking for millions of people across Asia and Africa.

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Palm oil prices are currently over $500 a tonne which is cheaper than US soybean oil. Oil producers are strongly encouraged to use palm oil instead of soyoil as a feed stock.

But any sustained increase in palm oil demand from large renewable diesel plants will raise palm oil prices over time, and reduce palm’s discount to other soybean oils. and the seed of the seed.

On the other hand, the high cost of edible oil could renew fears of global food price inflation, which rose earlier this year after the United Nations vegetable oil index reached very high.

UN food price indices

For trucking companies in the United States seeking to reduce fuel emissions and comply with corporate green goals, the link between diesel tank top-ups and food inflation may appear to be away

But with diesel production swelling at such a rapid rate, the feed and fuel markets are becoming so tightly interconnected that a steady increase in demand for renewable diesel in California could cause a shortage of edible oil on the other hand. of the world.

Edited by Kenneth Maxwell

Our standards: The Thomson Reuters Trust Principles.

The views expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to maintaining integrity, independence and freedom from bias.

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