The renewable biodiesel fuels boom added a significant bump to soybean prices over the past couple of years. Here’s the big question: Will that boom continue and increase demand for soybeans even more, helping prices jump higher? Or will the boom turn into a more stable market for soybeans, much like the ethanol market for corn today?

A report issued by CoBank in September 2022 indicated that an additional 5.5 billion gallons of renewable biodiesel could be needed by 2030, requiring an additional 17.9 million acres of soybeans annually. That bullish scenario would most likely send soybean prices much higher.

Renewable biodiesel reality

That’s not the scenario ag economist Scott Irwin sees as most likely. Speaking at the Purdue Top Farmer Conference, Irwin, Laurence J. Norton Chair of Agricultural Marketing at the University of Illinois, said he sees a roadblock making such strong growth unlikely.

What some people — even those in the industry — seem to ignore is that the renewable biodiesel market is based upon multiple government policies, not true consumer demand, Irwin explained. “If you take the policies away, there is no demand for renewable biodiesel because it is significantly higher than regular diesel fuel,” he said.

“Significantly” is usually $1.50 to $2 per gallon more. It’s just more costly to produce, Irwin said. “The demand for renewable biodiesel fuel above the level set by the Renewable Fuel Standard and other policies is zero,” he said. “The current ceiling based on the RFS is in the 4 [billion] to 4.5 billion gallons per year range. It would take changes in policies or some other source of demand to raise total demand above that level.”

Bears vs. bulls

Current plans in the industry call for building more soybean crush plants and more plants to produce renewable biodiesel. Nameplate production capacity for renewable biodiesel plants in the U.S. stood at 4.1 billion gallons at the end of 2023, with expected capacity to grow to 5.5 billion gallons in 2024, 6 billion by 2025 and 7 billion later.

If Irwin is right and demand fizzles above the RFS volume mandate, what would a bearish scenario look like? He believes plans for some new renewable diesel fuel plants would be shelved, much like what happened with plans for some ethanol plants.

Chad Hart, ag economist at Iowa State University, notes that at one time during the ethanol boom, a map of existing and projected ethanol plants had about 640 dots. In 2023, there were 187 fuel ethanol plants in the U.S., far fewer than 640.

Some plants producing traditional biodiesel, known as FAME biodiesel, would likely be mothballed. Capacity at all renewable biodiesel plants could be reduced.

On the bullish side, what could cause the renewable biodiesel boom to continue as some expect? One path would involve increases in the amount of gallons mandated through various government actions. Given the current environment, Irwin sees that as unlikely.

“The real wild card is Canada,” he said. “They are adopting policy like California. If they carry through with it, demand for renewable biodiesel in Canada by mandate would go way up. It’s way too early to know how that might play out in demand for U.S. renewable diesel.”