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Illinois Soy is Crushing the Market
Unraveling the dynamics of soybean markets and the reasons behind the surge in crush facilities
By Mace Thornton
A $250 million expansion announcement in soybean crush capacity sparks excitement, especially in the heart of soybean country. With Incobrasa currently processing 10 percent of the state’s soybeans, the ag industry certainly took notice. But when the dust settled (pun intended), and the coffee shop talk commenced, one question made the rounds the most: What's it mean for us?
Soybean processors have signaled they intend to add three new soybean crushing facilities in Illinois by the end of 2025. That could solidify the state as a hub for transforming whole soybeans into soybean oil and soybean meal. If facilities come online as projected, it would mean a promising outlook for Illinois soybean producers and possibly the state’s broader agricultural landscape.
According to a 2023 study sponsored by the U.S. Soybean Export Council, the past seven years witnessed only one new soybean crush facility, in Quincy. However, the landscape is set to change with two facilities slated for 2024, in Hennepin and Cairo, followed by another in 2025, in Gilman.
Todd Main, Director of Market Development for the Illinois Soybean Association, says the expected crush expansion is built on heightened demand for soybean oil. And that increased demand for soybean oil sits atop a foundation of public policy incentives and mandates in support of biofuels at both the federal and state levels.
"The economic drivers for all these crush facilities are the incentives being offered to adopt and use renewable fuels,” he said. "California was the first state to create incentives for biofuels, and then Illinois passed similar incentives last year. That’s really blown up the market for soybean oil.”
Mac Marshall, Vice President of Market Intelligence for the United Soybean Board, points to the California mandate to decarbonize their economy by 30 percent by the end of this decade. That has created a substantial market opportunity for biofuels. Marshall notes that in terms of Gross Domestic Product, the California economy would be the fifth largest globally, just behind Japan.
Marshall explains that California, the most populous state in the U.S. and a large passenger vehicle market, might avail itself of electric vehicles as a solution to decarbonization. However, substantial demand for heavy equipment used in transportation and other industries, which is much harder to electrify. As a result, the state's policymakers are leaning toward next-generation renewable diesel, which is different than biodiesel and is produced through a unique refining process. Renewable diesel can be swapped outright for petroleum diesel, while biodiesel requires blending.
However, Marshall says the current opportunities for soybean oil as part of a decarbonized biofuels market goes back to the roots of biodiesel production. Back then, a group of forward-thinking farmers got together with the idea of creating a market opportunity for the excess supply of soybean oil. Beyond traditional biodiese, Main says, plans are taking shape in Illinois to produce both renewable diesel and possibly sustainable aviation fuel (SAF) in the future.
"Potentially, Illinois facilities will be able to produce SAF and transport that fuel directly to the airports in Chicago," Main said.
Airlines are certainly hyping their move toward SAF with great fanfare.
“I was on a recent United flight, and when the flight attendant came by with the in-flight beverage and pretzels, they also handed me a napkin,” Marshall recalls. “The napkin said, ‘We’re investing more in sustainable aviation fuel production than any other airline.’ So sustainable aviation fuel and its potential market size are absolutely staggering. To see things put out by the aviation industry, there's a clear push for decarbonizing, and that’s another transportation sector that’s hard to electrify.”
The Developing Trend
When soybeans are crushed, the result is roughly 80 percent meal and 20 percent oil. As a result, the projected increase in Illinois soybean processing facilities to satisfy the growing demand for soybean oil will also greatly increase the supply of soybean meal. Although the majority of the forecasted soybean oil supply is expected to cater to domestic biofuels demands, a substantial portion of the forecasted soybean meal is poised for export through Gulf ports.
“This wave of crush expansion is not about producing more meal,” Marshall says. “It’s about producing more oil because of those biofuels market signals coming from downstream. The bio-economy is creating a huge bio-energy market.”
However, Marshall cautions soybean supporters in Illinois and other states to proceed with care.
“It's not a done deal that all the plants are going to come online, nor is there any guarantee they will function at full capacity,” Marshall says. “As ASA’s Scott Gerlt says, ‘Announcements are not shovels in the ground,’ and they are not installed capacity or actual utilization. But there's a world in which, if everything is built as announced, and we do see a substantial 30 percent net increase in crush.”
Marshall also points out that the linear uptrend in soybean yields and production needs to be factored in. Although crush capacity might go up, so will the annual supply of soybeans that need, to be marketed.
“Over the last 20 years or so, yield trend lines have grown at an average of four-tenths of a bushel to five-tenths of a bushel annually,” he says.
Shifting Dynamics of Soybean Value
According to Marshall, the U.S. currently crushes about half of the nation’s soybean crop, about 60 million tons of the annual production of between 112 million tons and 120 million tons.
The announced surge in new crush facilities to meet the growing demand for soybean oil for biofuels will likely create value opportunities for livestock producers here and overseas. These producers feed rations composed of soybean meal, according to Main.
“There is a significant shift in the traditional value of soybeans,” he says. “Historically, soybean oil played a secondary role in overall value, with soybean meal taking the spotlight. Because of the increased demand for soybean oil for renewable fuels, the traditional value that we saw in the soybean profile has been stood on its head. This restructuring has opened up growth opportunities for the meal market. Meal is going to be very competitively priced going forward."
Marshall sees the value shift as one of transformational proportion.
“That transformational shift is probably the most important one we've seen since China came into the market as a large buyer of U.S. Soy as it acceded to the World Trade Organization in the early 2000s,” Marshall says.
Main views this as a growth opportunity for soybean meal export marketing, especially in feed use for livestock, poultry, and aquaculture. He saw this first-hand during a January market development mission to Southeast Asia.
"They have populations that are exploding, and even with the hurdles of swine and poultry diseases, their production levels are growing fast, 6 or 7 percent a year. This growth translates to an increasing demand for soybean meal, positioning Illinois as a key supplier globally. A lot of this is driven by price. There are going to be a lot of people looking at increasing the use of soybean meal as inputs in animal feed and in human food."
But U.S. soybean meal will not only be more competitive in price, Main says. It will also maintain an edge in quality.
"It's interesting because we've been talking about the need for new markets for meal,” he says. “Everybody wants U.S. soybean meal because of its quality, its chemical profile, and its digestibility. It's a reliable product, and our farmers produce a quality product. That really stands out with international buyers. As I travel around the world, and as I meet with teams that come here to look at our U.S. facilities, everybody wants U.S. soy.”
