Growth of renewable diesel production has been good news for the crop markets.
Added demand for soy oil and corn products has helped farmers. However, the increase in prices means it will cost more for those looking to feed their livestock.
As recently as 2017, total feed stock usage for production of renewable diesel and biodiesel was under 15 billion pounds, rising almost 72% to over 24 billion pounds in 2022, says Scott Irwin, an agricultural economist at the University of Illinois.
“Total feed stock usage grew over 5 billion pounds in 2022 alone,” Irwin said. “In terms of individual feed stocks, soybean oil represented around 50% of feed stock usage for renewable diesel and biodiesel until 2019, rose briefly above 60% in 2020, and thereafter declined to a little more than 40% in 2022.”
While feed availability has not come into question yet, the increased prices are notable, said Purdue University economist Michael Langemeier, though other factors may be at play as well.
He noted that feed availability should not be impacted in the short term, but renewable desel will have an impact on corn and soybean supplies in the future.
“If soybean prices go up to meet demand, corn prices will likely go up as well,” he said. “Thus, the impact of renewable diesel on feed costs is difficult to preduct.”
Since 2021, the hog finishing feed cost index has been on the rise, broken up by a slight dip in the early portion of 2022. Langemeier noted in his research that rising trend may be slowing.
Part of the reason availability hasn’t been an issue is a slight shift in acreage. The added demand for soy feed stock has encouraged more soybean acres. Any of the crops used for feed having a big yield this year would help to offset the added demand.
“Soybean meal and dried distillers grains have both risen by about 11% from a year earlier and complete feeds and other ingredients are up over 20%,” said Lee Schulz, ag economist with Iowa State University. “Higher costs coupled with compressed hog prices continue to be detrimental to profitability.”
The biggest impact fuel plants have may be a shift in what is used in feed. While the oils are used for biodiesel and renewable diesel, the meal and distillers grains as a co-product of fuel production will be a good energy option for hog farmers.
