Both corn and soybeans enjoy a long history of production on millions of acres in the upper Midwest. This history has led to a large infrastructure of equipment, storage, rail, barge, and truck transportation. Soybeans, like many crops, face insect and disease pests along with weather-related challenges. An emerging disease has gained much attention in recent years. Soybean rust, a fungal disease native to Asia, has spread to the soybean fields of South America and finally to U.
Rust control is expensive, requiring fungicide applications, and yield damage can be extreme. Production costs will vary depending on location, cropping systems, and fluctuation in price of energy.
Major expenditures in soybean production include planting, harvesting, seed, and pesticides. When including overhead costs for land, insurance, etc. Biodiesel profitability is extremely variable and based on the continuously changing prices of biodiesel, soybean oil, co-product glycerin, methanol, and natural gas.
Price of soybean oil feedstock is one of the driving factors in profitability Hofstrand and Johanns, The capacity of soybeans used for biodiesel production grew from zero to over a billion gallons per year in the past two decades s and s. During that time, biodiesel production rose and fell depending on the price of feedstock, price of petroleum oil, and federal and state subsidies provided to the industry.
One major challenge for soybeans is the competing uses for soybean oil. Soybean oil is used in human food products, as cooking oil, and for numerous industrial applications. Competition with other uses has caused price spikes in the soybean oil market, challenging the profitability of soybean biodiesel Wisner, A life cycle analysis of biodiesel done by the USDA found that soy biodiesel yields 4.
In comparison, petroleum diesel has a fossil energy ration of 0. Berglund D. Chen S. Reynolds D. Ferguson R. Gibson L. Hill A. Pages Hoeft R. Hofstrand D. Jones S. Add us to your site. Today in Energy. May 7, Soybean oil comprises a larger share of domestic biodiesel production Source: U. Department of Agriculture Note: Marketing years for soybeans run from October 1 through September Source: U.
Energy Information Administration, based on Bloomberg. Given that all of the variables are specified on a per pound basis, the results clearly highlight the dominant role that soybean meal plays in determining the value of soybeans.
Roughly speaking, a one cent per pound change in soybean meal prices has about 2. We now split the sample to see if there is evidence of a larger impact of soybean oil prices as the biodiesel boom took place. The estimation results for April 13, through December 30, are,. There is, of course, some variation in the size of the estimated slope coefficients for soybean meal and oil across the two sample splits. But the important result is that the coefficient on soybean oil barely changes.
This provides definitive evidence that the relative impact of soybean oil prices on soybean prices was unaffected by the biodiesel boom. Soybean meal and oil are joint products produced in fixed proportions when crushing soybeans. Conventional wisdom is that soybeans are crushed for their soybean meal value rather than soybean oil. The biodiesel boom in the U. This has raised the possibility of conventional wisdom regarding the source of value for soybeans being upending. We analyzed weekly soybean meal, soybean oil, and soybean prices from April 13, through September 8, and found no evidence that the relative impact of soybean oil prices on soybean prices was affected by the biodiesel boom.
If anything, there has been a downward trend in the value of soybean oil in recent years, just the opposite of what one would expect if the biodiesel boom exerted unusual upward pressure on the price of soybean oil relative to soybean meal.
Irwin, S. Irwin, S and D. Disclaimer: We request all readers, electronic media and others follow our citation guidelines when re-posting articles from farmdoc daily. Guidelines are available here. The farmdoc daily website falls under University of Illinois copyright and intellectual property rights.
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