Soy Oil’s Share of US Crush Profits Rises Amid Increased Demand

Soybean oil has historically taken a back seat to soymeal in driving profits for the US soybean crushing industry. That’s changed, however, amid booming demand for vegetable oils in the US and around the world.  

Soybean oil’s contribution to total profits from the crushing process, commonly called oil share, is currently close to 48%, a level that has only been reached a handful of times in the past 20 years. The remainder of the crush value comes from soybean meal. 

That near-parity for soybean oil is all the more striking when considering that crushing yields 80% soybean meal and 20% oil on a pound-for-pound basis.  

The industry shift comes as vegetable oils have faced tighter global supplies and rising prices for the past two years, pushing up processors’ crush margins. 

Indonesia’s announcement last week that it would ban exports of palm oil, later clarified as an export ban only on palm oil products and not crude palm oil itself, exacerbated the upward price moves, as did Russia’s invasion of Ukraine in February. Palm oil is the most widely used edible oil, followed by soybean oil.

Click here to download Gro’s Strategic Insight, Fuel for the Fire: The Russia-Ukraine War and Vegetable Oil Prices, to learn more about what’s driving global vegetable oil prices. 

Edible oils, which are used by nearly all consumer packaged goods companies, are often interchangeable, so a shortage of one type exerts pressure on the others. US soybean oil stocks-to-use ratio, an important measure of supply availability, is projected to finish 2022 at one of its tightest levels in years. 

Front month soybean oil futures have been trading at their highest levels on record, topping 80 cents per pound. Prior to 2021, soybean oil futures exceeded 70 cents/pound only once for a brief period in 2008. 

Soybean oil is also the primary feedstock in the US for renewable diesel. With many new facilities slated to come online, US production of renewable diesel is forecast to almost triple to 2 billion gallons (5.8 billion tonnes) in 2022 from a year earlier. Additional plant construction has been announced for subsequent years. 

Historically, when “oil share” reached such high levels — and soybean processors drew as much profit from crushing for oil as they did from crushing for meal — it was only under unusual and generally short-lived circumstances. But with the anticipated growth of renewable diesel demand, and continued heightened demand for edible oil for food products, Gro expects that soybean oil's share of crush value will remain high for some time to come.

-Related Insights

Indonesia Palm Oil Export Ban Drives Up Vegetable Oil Prices

USDA Raises Soybean Exports Estimate, but Gro Predicts Demand Will Increase Further

Fuel for the Fire: The Russia-Ukraine War and Vegetable Oil Prices

(Infographic) The War's Impact: Vegetable Oils Drive Global Food Inflation