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Farmers Will Wait a Little Longer to Hear the Biofuel Verdict

Meanwhile, Corn Prices Stay Low

Farmers hoping for the biofuel market to open up are left in limbo for a few more weeks. The new climate model for sustainable aviation fuel (SAF) is being revised and the release date pushed back several weeks. 

With no decisions made as to whether ethanol will be an approved feedstock for jet fuel, farmers are stuck with surplus corn crops trading at record lows. 

Since the Renewable Fuel Standard (RFS) passed in 2005 the price of crops and energy have been closely linked. Corn is grown for human consumption, livestock feed, fuel and is also exported overseas. Ethanol for SAF would create an expanded fuel market.

More Pressure on an Already Imbalanced Market

Last May corn was trading at $8 a bushel. Last week it was below $4.50.  It’s not an ideal situation for farmers who increased corn crops hoping to take advantage of market highs.  

An extra 6 million acres of farmland in the Midwest were used for corn crops last year.  Drought in South America and war in Ukraine impacted the grain market. As wheat became limited, the price went up and people substituted their wheat for corn, pushing the price of corn up. Higher corn demand encouraged farmers to plant more. 

Since then, Ukraine has started exporting wheat again, the price fell, reducing  the demand for corn. Also contributing to a decreased demand are America’s smaller cattle herds. There are fewer livestock to feed. Drought prompted many farmers and ranchers to send large numbers of cattle to market resulting in the fewest head of cattle since the 1960’s.  Similarly, China’s efforts to downsize hog herds means less demand from foreign markets for livestock feeds like soy and corn; buyers that American farmers depend on. 

Farmers Hold on to Hope 

Right now, there is a surplus of 2.53 billion bushels of corn. With nothing to counterbalance supply, the potential for surplus corn to be used in making jet fuel is a glimmer of hope for farmers. 

The aviation industry aims to decrease greenhouse gas emissions 50% by 2050. Sustainable aviation fuel is a major part of this effort. If ethanol is approved as a sustainable aviation fuel feedstock, it would create a large market for farmers. Roughly 30 billion gallons worth of biofuel would be needed. Even if corn producers represented just a portion of biofuel supplies, it could bring balance back to trade prices.

China’s used cooking oil and sugarcane from Brazil are strong competitors to American corn as a feedstock for sustainable aviation fuel. The industry is focused on sustainability and a diverse market of feedstock options for biofuel will help stabilize markets.

Tax credits are also on the horizon for qualified SAF facilities. As much as $1.75 per gallon of fuel that does not have greenhouse gas emissions.


What’s Delaying the Decision?

Agriculture Secretary, Tom Vilsack, announced that the committee was not fully aware of the scope of methods and practices farmers are employing to reduce emissions in order to qualify.  No till farming, cover crops, and reduced nitrogen application are all methods still being vetted. Though they are creating delays now, these practices are exactly what could help the corn industry qualify. 

Even with an element of urgency, the ultimate goal is to find sustainable practices. Those evaluating farming methods feel that more time is needed to examine ethanol as an option.

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