Go for the Green: Money, Environment and Soy Crush

May 25, 2022

By Matthew Wilde

The explosive growth of domestic soybean crush that will consume hundreds of millions of bushels of soybeans is a game changer for farmers and the industry.

That’s how several grain producers, market analysts and soybean industry officials described the expansion. It will have a profound effect on commodity prices, the soybean complex, trade, seed production and possibly future planting intentions.

“It’s the biggest change that this industry has been through probably ever in a short period of time,” said Jim Sutter, U.S. Soybean Export Council executive director. “It’s driven by increased demand for renewable diesel.”

It’s a topic that required a deep dive behind the who, what, why, when, where and how of the story. Ultimately, the information is meant to help DTN readers — namely farmers and ag industry officials — make more informed business decisions.

In case you missed all or parts of the four-part series, you can find the links to the stories at the bottom of this blog.

Readers will also find the information in an upcoming issue of the Progressive Farmer magazine.

At least 14 new soybean processing plants are in various stages of construction, expansion and development — and Cargill just announced a new one this week for southeast Missouri, saying it will break ground early next year and complete it by 2026. A couple facilities have recently been expanded. Altogether, this most likely means U.S. soybean crush will increase by more than 500 million bushels in the coming years. In its May report, USDA’s crush estimate for the 2021-22 marketing year is 2.215 billion bushels.

What’s behind the big jump in crush? One word: green.

Renewable diesel use is skyrocketing due to green initiatives by federal and state governments and companies to reduce greenhouse gas (GHG) emissions and save the planet. Renewable diesel and biodiesel GHG emissions are, on average, 80% less than petroleum diesel.

Petroleum companies found they can make a lot of green selling renewable diesel due to various tax incentives and credits. Thus, production capacity has increased 86% over the last year.

Soybean oil is the most common feedstock used to make renewable diesel and has the most growth potential. That sparked the soy crush expansion.

The good news for farmers is the eventual competition for acres between soybeans and other crops will likely boost floor prices for all commodities, especially soybeans and corn. Competition for soybeans among crushers will also improve basis levels. That all equals more green for farmers.

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Video: The 15-Year Bet Behind Every New Variety!

Canada is trying to decide how much agricultural research capacity it can afford to lose. Brian Rossnagel believes the better question is whether the country can afford to rebuild it.

The longtime barley and oat breeder makes the case with a simple fact about his profession: the consequences of today’s decisions may not become visible for 10 or 15 years.

“Pick the right parents. That’s the biggest thing,” Rossnagel says. “If you pick the wrong parents, you’re not going to get anywhere—and you don’t know that until 10 years, 15 years later.”

That warning carries particular weight as Agriculture and Agri-Food Canada moves to reduce spending and streamline parts of its science operations. The department’s 2026–27 plan anticipates the loss of approximately 665 positions by 2028–29 and says some research will be reduced where capacity exists in academia or industry. AAFC says the changes will make its science operations more cost-effective over the long term.

For Canada’s seed industry, Rossnagel’s career illustrates what is at stake.

This fall, the retired University of Saskatchewan breeder will be inducted into the Canadian Agricultural Hall of Fame. During his 35-year career at the Crop Development Centre, he helped develop more than 100 barley and oat varieties, including CDC Austenson—one of Western Canada’s most widely grown feed barleys. His induction recognizes not only those varieties, but the collaboration and research system that made them possible.

Rossnagel is quick to emphasize that none of it was the work of one person.

“The first thing I thought about was all the other people who contributed to whatever success I and my program had over the years,” he says. “We know that it’s not an individual who does this. It’s a group—a team.”

That team extends well beyond the breeder whose name appears beside a variety. It includes technicians, pathologists, quality specialists, statisticians, regional testing sites, seed growers and industry partners. It also includes the breeders who came before and those who will carry the germplasm forward.

CDC Fraser barley, for example, moved through three breeding careers. Its parents came from Brian Harvey’s program. Rossnagel advanced the material after Harvey retired, and Aaron Beattie later guided it through registration and release.

That kind of handoff is normal in plant breeding. The person who makes the original cross may never see the resulting variety reach farmers.

It also explains why lost research capacity cannot simply be switched back on when budgets improve.

“If you shut it off, it’s very, very difficult—and particularly costly—to start it up again,” Rossnagel says. “If you have to start from scratch, it’s going to be at least 10 years before anybody notices whether you’re getting anything done or not.”

The concern is not simply how many experimental lines Canada can process. Modern equipment, statistical tools and genetic technologies allow today’s breeding programs to evaluate tens of thousands of lines—far more than Rossnagel could handle when he entered the field in the early 1970s.

But efficiency and automation do not generate every idea.

“If you pare back down, and instead of having six or seven individual scientists concentrating on wheat breeding, you go down and say three people could handle all this, well, that’s half the ideas gone,” he says. “Particularly if you happen to lose the three people who had the really neat and innovative ideas, boy, that’s a problem.”

It is a timely distinction for Canadian agriculture. Consolidating programs may preserve the volume of material moving through a system, at least initially. It may not preserve the diversity of thinking, regional knowledge or willingness to pursue unconventional crosses.

That regional knowledge matters because Canadian agriculture is not one uniform production environment. A variety suited to southern Alberta may face different disease, moisture and maturity pressures than one grown in Manitoba, Ontario or Atlantic Canada.

“Agriculture is applied biology,” Rossnagel says. “Biology, all around the Earth, moves from the poles to the equator. It does not move from Newfoundland to B.C. like politics do.”