August 2

8/2 – Soy-oil fundamentals are terrible going forward and that’s predominantly due to energy policy. In the U.S., we put corn-based ethanol into our gasoline and can’t use more than 10% because it is corrosive and will destroy a car’s engine. The Europeans use biodiesel, which does not have a 10% blend wall. Diesel blends can contain up to 100% renewable feedstock. The International Energy Agency says that U.S. production capacity for renewable diesel will increase fivefold between now and 2024. The USDA projects soy-oil usage for biodiesel at 12B lbs in 2021/22, up 29% from a year ago and already representing 46.3% of all domestic soy-oil output. It’s food vs. fuel again, similar to what happened in 2011/2012 with corn. Soy-oil futures prices, which closed at $.6582/lb on 7/30, have averaged $.66/lb over the past 3 months, after averaging $.26 over the prior 3 years.