Squeezing More Value Out of Soybean Products

Squeezing More Value Out of Soybean Products

Demand for soybean products is projected to reach 45.9 million tons in 2022. Amid a sea of regulations impacting the use of soybean products in applications ranging from food to fuel, suppliers have begun to develop crops with specific traits in order to produce soybeans and soybean products with more desirable attributes suitable for specific roles.

Regulatory Challenges & Blessings

Soybeans are widely grown as an agricultural crop. While the bean itself is edible, its derivatives – soybean meal and soybean oil – are used in many different applications, including food for humans and animals, biodiesel, and industrial chemicals. In the US, regulations exert significant pressure on the production and consumption of soybean products.

Concern over US dependence on foreign oil and the environmental impacts of this non-renewable energy source spurred federal mandates regarding alternative fuels such as biodiesel, the majority of which is produced using soybean oil.

Regulations also significantly impact the use of soybean products in food. In 1999, the US Food and Drug Administration allowed food labels to state that a diet low in saturated fat and cholesterol that includes at least 25 grams of soy protein per day may reduce the risk of heart disease. However, other regulations have posed a challenge to manufacturers of soybean products such as partially hydrogenated oil (PHO) and firms that incorporate these ingredients in food. In 2015, the FDA deemed that artificial trans fats are not “generally recognized as safe” for humans and gave food manufacturers three years to remove PHOs (a major source of trans fats) from their products. By June 18, 2018, US manufacturers are expected to comply with the FDA nutrition initiative and remove PHOs from human food that has not been otherwise authorized by the FDA.

Fuel Requirements

Over the 2007-2017 period, demand for soybean oil for biodiesel production rose 11% per year. Much of this growth was attributable to efforts to meet targets set by the EPA’s Renewable Fuel Standard Program, which called for a doubling of biomass-based diesel from 0.5 billion gallons in 2009 to 1.0 billion gallons in 2012.

The Energy Policy Act of 2005 created the Renewable Fuel Standard, which sets standards for the replacement of petroleum-based fuel with biofuel. The subsequent Energy Independence and Security Act of 2007 expanded these mandates, setting a goal of 24.0 billion gallons of renewable fuel (at least 1.0 billion gallons of which must be biomass-based diesel) in 2017 and 36.0 billion gallons in 2022. The Environmental Protection Agency, which sets yearly targets for biomass-based diesel, has mandated 2.1 billion gallons of this material by 2018, an increase from 1.63 billion gallons in 2014.

As of April 2018, the ultimate fate of the Renewable Fuel Standard is unknown. The Trump administration has discussed a potential rollback of the biomass-based diesel targets, in particular, and maintaining a year-round E15 ethanol requirement designed to help corn growers in the face of a mounting trade war with China. However, there is no equivalent effort to protect soybean growers in place.

The push for increased production of biofuels by federal mandate is a significant driver of overall soybean demand, and is a particularly powerful driver of soybean oil production.

Safe to Eat?

Previously, food labels were required to list the amount of trans fat in each serving. In response to this regulatory challenge, the soybean industry has developed a high oleic soybean oil that is stable at high temperatures and possesses a long shelf life, among other favorable characteristics, without hydrogenation. Through genetic engineering, DuPont Pioneer created the high-oleic Plenish soybean variety that yields such an oil, and Monsanto offers a similar variety called Vistive Gold. Both companies have collaborated with farmers and major soybean processors to grow these soybean varieties and bring products derived from them to the food market.

Soybean producers have begun an effort to develop crops that yield a higher percentage of protein than in previous varieties, making US soybeans more desirable to livestock farmers. In addition to use for livestock animal feed, soybean meal has found a role as feed in aquaculture settings. Soybean meal fulfills the need for an alternative protein source that is less dependent on catch rates of wild fish, a major source of protein for aquaculture use.

The development of high oleic and potentially high protein soybeans, as well as an uptick in food manufacturing, will drive greater demand for soybean oil in food and beverage applications. Faster gains will be restrained by moderation in the biodiesel market, following a historical period marked by regulation-induced growth.

Want to Learn More?

Don’t worry, we have you covered! For additional information and analysis of US industry trends, see Soybean Products: United States, a report published by the Freedonia Focus Reports division of The Freedonia Group. This report forecasts US soybean product demand in short tons and US dollars at the manufacturer level to 2022. Total demand is segmented by application in terms of:

  • animal feed
  • food and beverage
  • biodiesel
  • industrial

While you’re there, check out some of our related reports, which include Agricultural Pesticides: United States, Fertilizers: United States, and Field Crop Seeds: United States.

About the Author

Chris Dyer is a Market Research Analyst for Freedonia Focus Reports. He holds a Master of Arts in Security Studies, and his experience as an analyst covers multiple industries.