The consumption of soybean oil and all other fats and oils for methyl ester (biodiesel) production has not been reported by the Census Bureau since July 2011, Good says. The USDA’s World Outlook Board indicated that it relies on data reported by the U.S. Energy Information Administration to estimate the amount of soybean oil used for biodiesel production.

“Biodiesel production totaled 723.3 million gallons during the 2010-2011 marketing year and 928.9 million gallons during the first 10 months of the 2011-2012 marketing year,” Good says. “The estimate for August 2012 will be available on Nov. 28. Production for the marketing year may be near 1.13 billion gallons. For the 2011-2012 marketing year, the USDA estimates that 4.9 billion pounds of soybean oil were used for biodiesel production, up from 2.737 billion pounds in the previous year. That estimate implies that soybean oil accounted for about 57% of the feedstock used in the production of biodiesel, compared to about 50% in the previous year,” Good says.

For the current marketing year, Good says that the USDA also projects soybean oil consumption for the production of biodiesel at 4.9 billionpounds. However, the EPA has increased the minimum amount of domestic biodiesel consumption from 1 billion gallons in 2012 to 1.28 billion gallons in 2013. The increase of 280 million gallons will require about 2.1 billion pounds of additional feedstock if biodiesel trade remains at the same level as in 2012.  

“Biodiesel production could also exceed the minimum requirement in order to meet the advanced and total biofuel mandate for the year,” Good says. “The USDA projection of soybean oil consumption implies that most of the increase in biodiesel production in the 2012-2013 marketing year will come from feedstock other than soybean oil.  Alternatively, soybean oil consumption will exceed the current USDA projection.

“In the first eight weeks of the 2012-2013 marketing year, soybean oil prices averaged 48¢/gal., well below the USDA projection for the year,” Good says. “With demand potentially stronger than currently projected, the increase in prices that began two weeks ago is likely to be extended.  Unless the biofuels mandate is amended, price strength could extend well into the future,” he says.