The world vegetable oil markets have come to life during December with European rapeseed,

Canadian canola oil, and Malaysian palm oil returning to previous 2021 highs with US soybean oil
not quite there yet (but recently trying). Vegetable oil markets peaked in early summer and have
drifted lower since but have now entered into another mode and appear poised to return prices
to prior highs led by non-soy vegetable oils.
The below chart from the Chicago Mercantile Exchange features the price history for the March
2022 delivery soybean oil contract and displays the early summer peak at $.64 per pound, the
drift to $.50 ish through December, and the recent recovery to $.56 ish.

Do global vegetable oil markets go to new highs soon? I think so. Why? More buyers than sellers.
Read through to the end for my explanation.
Two December issued reports are worth considering. First is an overview (and very worthwhile
read https://www.iea.org/reports/renewables-2021) from the International Energy Agency.
While the report goes into detail on global supply and demand centers for renewable fuels I will
focus on their commentary on the US market, US policy, and US feedstock availability.
The below chart captures the impending acceleration in demand growth for renewable diesel
and the frequently overlooked and not readily forecasted (because policy remains uncertain but
would appear to be inevitable) demand for sustainable aviation fuels. Hint: more buyers.
Demand for biofuel trends higher through 2026 while “biojet” demand currently remains
understated given pending legislation. The “biojet” likely expands sharply post the inevitable
regulation of advanced jet fuel but airlines have already adopted the advanced technology as
evidenced by this United Airlines flight at the start of the month:
(https://www.spglobal.com/platts/en/market-insights/latest-news/agriculture/120121-united-
airlines-launches-first-commercial-flight-with-100-saf).

What I like about the IEA report is that it hedges its bets because of the one limiting factor (and
the favorite topic for most of my posts) to the success of the ambitious development of
renewable diesel and biojet: the feedstock, namely the only one that can scale to meet the
ambitions: soybean oil.
Clearly the IEA analysts understand that development of renewable diesel and biojet cannot
occur in the timeframes announced without a dramatic increase in soybean processing in the
United States. New soybean plant announcements continue but the total capacity announced to
date still does not meet the demand from the currently calculated road fuel demand and the
currently not calculated aviation (and marine) fuel demand.

While the IEA hedges its bets with its report, another qualified analyst does not but asserts high
confidence that the feedstock (soybean oil) will get produced.
This week the Advanced Biofuels Association released a report completed by the widely followed
(in grain and oilseed trading) LMC consultancy that suggests the biofuels industry will have all the
feedstock it needs for growth and will not be impeded by lack of feedstock supply.
While I have not seen the report itself, I did attend an early December presentation by the LMC
oilseed analyst (Dr. James Fry) in which he made the compelling case that between soybean
acreage expansion in the US and the ability of the US farmer to grow more soybeans per acre,
the US soybean industry will meet the increase in soybean oil demand from the renewable diesel
industry.
He summarized the presentation I attended this way:

There you have it! More buyers (the renewable diesel industry) than sellers (the US soybean
processing industry) so prices for vegetable oils likely march to a new higher level ($.70 to $.80
per pound) and stay there until more soybean processing capacity (A LOT MORE) gets
constructed.
Happy New Year to all and I hope to see many of you next week January 4, 5, and 6 in KC at
FarmCon hosted by Kevin Van Trump! https://www.farmcon.com/