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    Oil Crops Outlook: Tightening Global Vegetable Oil Stocks

    Supply and use forecasts of U.S. soybeans and soybean meal for 2015/16 are unchanged this month. USDA raised its forecast of 2015/16 use of soybean oil for biodiesel this month by 200 million pounds to 5.4 billion. USDA raised its forecast of the 2015/16 average price for soybean oil this month by 1 cent to 28.5-31.5 cents per pound while the price for soybean meal was lowered $10 per short ton to $290-$330.

    Domestic Outlook

    RFS Rule May Boost Soybean Oil Use for Biodiesel in 2015/16

    Soybean supply and use forecasts for 2015/16 are unchanged this month. Also unchanged are the expected outputs of both soybean meal and soybean oil. However, an altered outlook for biodiesel is likely to affect relative values of those commodities. Throughout 2015/16, processors may gradually earn a greater share of the value of soybean crushing from soybean oil and less from soybean meal.

    Although the November average price for soybean oil dipped to 26.4 cents per pound, by early December prices had rallied toward 30 cents per pound. USDA raised its forecast of the 2015/16 average price for soybean oil this month by 1 cent to 28.5-31.5 cents per pound.

    In contrast, the central Illinois soybean meal price declined in November to $309 per short ton from an October average of $328. Prices have continued to weaken into early December in the aftermath of the election of Argentina’s new president, who has indicated an intent to reduce export taxes on soybeans and soybean products once he takes office on December 10. USDA forecast the 2015/16 average price for soybean meal down $10 per short ton this month to $290-$330.

    In November, the Environmental Protection Agency (EPA) published the final rule on U.S. biofuel requirements under the Renewable Fuel Standard (RFS) for calendar years 2014-2016. EPA set minimum volume requirements for biomass-based diesel at 1.63 billion gallons for 2014, 1.73 billion for 2015, and 1.9 billion for 2016.

    Some portion of the mandate has and can continue to be satisfied through imports of biodiesel and renewable diesel. In 2014, U.S. imports of biodiesel and renewable diesel totaled 313 million gallons and accounted for 18 percent of the total supply. Imports in 2015 (through September) have already surpassed that level.

    Also, up to a maximum of 20 percent of the each year’s requirement can be met by a surplus of RINs (used to report RFS compliance) that have accumulated from the previous year. In reflection of the tighter balance between the supply of these unused RINs and the new higher expected demand, their value has increased sharply since the EPA announcement.

    In addition, biodiesel and renewable diesel can also contribute toward the RFS for advanced biofuels and the overall RFS mandate. EPA set 2014-2016 requirements for advanced biofuels at 2.67 billion, 2.88 billion, and 3.61 billion ethanol-equivalent gallons, respectively. Lastly, the total biofuel volume requirement is set at 16.28 billion gallons for 2014, 16.93 billion for 2015, and 18.11 billion for 2016.

    Thus, demand for biodiesel may increase beyond the biomass-diesel requirement to meet part of these other mandates, which would buoy incentives for domestic production and imports of biodiesel in 2016. While other biodiesel feedstocks can also be used, soybean oil could see the largest impact of this development. So far in 2015, soybean oil has accounted for more than half of the feedstock used to produce biodiesel.

    Consequently, USDA raised its forecast of 2015/16 use of soybean oil for biodiesel this month by 200 million pounds to 5.4 billion.

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