It’s clear sustainable aviation fuel (SAF) could affect corn and soybean profitability for years to come. The demand for ethanol and bio-based diesel is widely based on how successful biofuels are in feeding the SAF market. That success might be determined by the U.S. Department of the Treasury.
It seems strange for the Treasury to determine the production practices needed to qualify corn- and soybean-based biofuels for tax credits. If you produce corn and soybeans that biofuels processors will use to claim 45Z tax credits, your crops will have greater profit potential.
That’s how the outlook is set up now, but two scenarios are possible after this fall:
- A Harris administration would likely continue the “climate-smart” initiatives in the Inflation Reduction Act, including 45Z.
A second Trump administration would bring changes. He told a rally in July, “They want to make our jet fighters [use] a biofuel that shows 18% less efficiency. That’s the difference between winning and losing a fight. You know what happens? I say I’m not doing it. We ended all of that stuff. They brought it back. We will end it on day one.”
While that puts the future of SAF in question, a Trump presidency would extend the use of liquid fuels. Liquid fossil fuels need the octane from corn-based ethanol. That’s “less flashy” than SAF, but it could bring consistent, extended ethanol demand.
Don’t Sleep On the July WASDE
Traders didn’t expect big changes in the July World Ag Supply & Demand Estimates (WASDE). But a quick check of the numbers shows old-crop usage estimates can swing widely in the July WASDE and the 150-million-bushel increase in 2023/24 corn use from June to July is an example. Total use in July 2022/23 increased 50 million bushels from June; use dropped 25 million between June and July in 2021/22, increased 25 million bushels in 2020/21 and estimated total use in the 2019/20 marketing year fell 145 million bushels from June to July. Those are market-moving old-crop adjustments when traders are almost fully focused on new-crop supply-side fundamentals.
Bottom line: Don’t sleep on the July WASDE. The World Ag Outlook Board at USDA has clearly targeted the July WASDE as a month to adjust corn usage estimates heading into the final six weeks of the old-crop marketing year.
