In this blog, Jeff Rasmussen, MRC’s Director of Sales & Marketing, shares his insights on the soybean industry and the soybean crush business. He covers the role railcars play in helping shippers move product, and how MRC is positioning itself to support that growth.
Historically, we crushed beans primarily to get meal for animal feed and we had to figure out what to do with the resulting vegetable oil. Now the situation is somewhat reversed.
“Low Carbon Fuel Standards” and federal tax incentives have created a market for soybean oil to replace a certain amount of traditional diesel fuel because soybean oil is lower in carbon and more sustainable.
Soybean oil (or renewable diesel) is also favorable to biodiesel, which still requires blending with actual petroleum. Demand for animal feed hasn’t changed, but the oil now represents a larger percentage of the value extracted from a soybean.
Today, about half of all soybean oil produced domestically goes towards clean fuel production, and it tends to move by rail because the hauls are long, originating in the Midwest and often traveling to both California and the Gulf Coast.
The nickname for the four largest players is “ABCD,” and it refers to …but other significant players include Bartlett, Landus, Cenex Harvest States (CHS), Ag Processing, JD Heiskell and Incobrasa. MRC leases railcars to most of these companies.
The crush facilities tend to be situated near the soybeans, which is optimal from the perspective of transportation cost. Most of the major facilities are in the Dakotas, Minnesota, Iowa, Nebraska, Illinois and Ohio.
Some plants are quite old, but there’s been a lot of new capacity added in recent years. This includes expansions at existing locations as well as brand new facilities. Recent greenfield projects have required an investment in the $350MM to $500MM range.
There are two basic car types in the soy crush space: 29k gallon AAR211 tank cars (to haul vegetable oil) and gravity covered hoppers ranging from 5600 to 5800 cubic feet (to haul soybean meal).
Until recent years, the preferred covered hopper was smaller at around 5400 cf, but this car is proving to be suboptimal relative to the density of the commodity. All the major builders manufacture covered hoppers specifically for soybean meal and most of them build veg oil tanks as well. The primary manufacturers are FreightCar America, Greenbrier, National Steel Car and Trinity.
The most recent covered hopper designs for soybean meal are lighter and shorter than prior versions. The lighter empty car weight gives the shipper a couple extra tons of payload in each car while the shorter car length allows them to fit more cars in a unit train or on a rail siding. The latest covered hopper designs are all 3-pocket instead of 4-pocket, resulting in easier unloading, lower costs for maintaining gates and the aforementioned lower tare weight.
Absolutely. In the past few years, MRC has built cars for soy crush shippers with FreightCar, with Greenbrier, with National Steel and with Trinity. We’ve done both build-to-order transactions and spec builds and we’ve built both soybean meal covered hoppers and veg oil tanks. Without exception, the shippers have been pleased with these cars.
With the covered hoppers in particular, they’re happy with both the payload (which is now approaching 112 tons per car) and the ease of both loading and unloading.
MRC positioned itself nicely by working with one of the builders to provide a “test” car where we have just one newly built covered hopper, which shippers can use for a couple trips to make sure the car meets expectations for payload and ease of use. The car just arrived at its third shipper this week, and we have two or three more parties who will test it as soon as it’s available again. One of the prior users has already placed an order with MRC after successfully testing this car.
It remains unclear, but we’re optimistic, and the railcar builders appear optimistic as well. They’ve been making small refinements to their soybean meal covered hoppers in anticipation of future build opportunities.
On the shipper side, in MRC’s recent meetings with various soy crush players, we’ve heard several hints about growth plans, but there haven’t been any significant new projects announced thus far.
Renewable legislation will also be a key factor in whether there’s more growth, much like we experienced with ethanol 20+ years ago. For now, crush margins have been terrific and this also favors growth.
Click here to see the 5-minute video of Jeff Rasmussen sharing his insights on MRC’s approach to the soybean industry.
