The European Commission said on January 29 it had approved U.S. soybeans that meet the technical requirements by the European Union (EU) for producing biofuels, as part of the bloc’s efforts to ease tight trade relations with the United States.
European Commission President Jean-Claude Juncker and U.S. President Donald Trump last July signed a trade accord, where Trump agreed not to impose duties on car imports from EU while the other side promised to import more U.S. soybeans and liquefied natural gas.
The EU currently imports about 14 million tonnes of soybeans every year as feed for animals as well as for milk production, while soybeans from the US happen to be a very attractive feed option for European importers because of their relatively low prices.
The Commission said in a statement the approval of U.S. soybean imports for making biofuels would be effective until July 1, 2021, but could be extended beyond that date provided that they meet a set of sustainability criteria outlined in the EU’s Renewable Energy Directive.
“Today’s decision is new proof that the European Union is delivering on our commitments,” according to a Commission spokesman.
Soybeans exported from the United States to the EU are now only allowed for use as animal feed and the oil byproduct has to be returned because it’s restricted from being used as fuel under the bloc’s current energy regulations. The new rule would make a change to that.
An estimated 400,000 tonnes of soybean oil were used for producing biofuel in the EU in 2018, compared to some 5.9 million tonnes of rapeseed oil for the same use, according to Claus Keller of German commodity analysts FO Licht.
“I think the EU move will be positive for U.S. soybean sales prospects to the EU but it will not open a floodgate,” he said, adding that the U.S. exports would be affected by U.S.-China trade talks and on the future for Argentine biodiesel, which faces tariffs in the United States and could face measures in Europe.
According to data from the European Commission, U.S. soybean imports of the 28-nation EU in the second half of 2018 had jumped 112% since the July agreement was reached.
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The United States is the leading soybean supplier to the EU, accounting for 75 percent of EU’s annual soybean imports.
The growth has been boosted by a decline in U.S. soybean price, which fell after China imposed higher tariffs on U.S. soybean imports in its trade spat with the Trump administration, rather than as a result of any unanimous action by the EU, analysts said.