ASA CEO: Renewable Diesel Could Drive a New Era for Soybean Demand, But EPA Needs to Rethink the RFS
Farmers and industry leaders gather in Orlando, Fla. this week for the 2023 Commodity Classic, an annual event that not only boasts a large trade show floor, but serves as a meeting place for state and national commodity leaders to set policy priorities for the year. This year, the American Soybean Association (ASA) is focused on everything from the Farm Bill to EPA's recent Renewable Fuels Standard (RFS) proposal, while also pushing for increased market access through trade.
Steve Censky is ASA's chief executive officer (CEO), landed back at ASA in November 2020. That's after he served as USDA's Deputy Secretary from October 2017 to November 2020. He's no stranger to the CEO role at ASA. Just prior to his appointment to USDA, he served as ASA CEO for more than two decades.
The policy priorities for ASA differ year to year, but the excitement around biomass-based diesel and renewable diesel kicked into high gear during Commodity Classic last year. A year later, Censky says soybean farmers are concerned with what EPA's recent RFS proposal could do to that potential demand.
As soybean growers look at possible growing demand at home from the push for more biofuels and renewable diesel, Censky says EPA’s recent RFS proposal does the opposite, calling the renewable volume obligations (RVOs) within the proposal “extremely disappointing.”
“It basically flatlines our industry over the next several years. It doesn't take into account the significant growth that's happening in the soybean crush sector,” says Censky. EPA's announcement in early December set the proposed RVO for biomass-based diesel at 2.82 billion gallons for 2023, with an increase to 2.95 billion gallons in 2025.
ASA says that would only cover a fraction of planned production in the U.S. Censky points out there are currently 20 major expansions or new plants underway for soybean processing in the U.S., which would increase U.S. soybean processing to 7 billion gallons of production. That's an increase of nearly one-third from today, and short of the 2.95 billion gallons supported by EPA's RFS proposal.
“That's going to produce and that's driven by the demand that that we had thought was out there for renewable diesel and biodiesel. And unfortunately, EPA proposing to pull the rug out from under that investment,” says Censky.
Last week, ASA met with EPA Administration Michael Regan, and Censky says they delivered a clear message to EPA: the current RFS proposal would be bad for farmers, rural jobs and rural development. Censky claims soybean crush facilities who are still in the early stages of plant expansions or creation, are now worried EPA’s recent announcement threatens their investments.
“There are some projects that have been more recently announced, and that's about a two-year project. And those are the ones that we're frankly concerned about that if we don't get the EPA to have higher growth numbers in biomass-based diesel, then that could threaten those investments,” he says. “We've already heard that some of those players have put their investments on construction on quote, pause until they see the rule is finalized. And that will come in mid-June.”
When asked why EPA and the Biden administration aren’t looking at things like renewable diesel to meet their short-term climate goals, Censky says there’s still a thought that increased demand for oils will drive food prices higher. But Censky says a recent study from Purdue University found the opposite, that the increased soybean meal would actually help drive down the overall cost of food.
“It's a way to decarbonize our fuel supply,” says Censky. “Right now, we don't have to wait for a build out of the grid. We don't have to wait for some revolutionary new battery technologies. It is here. It is a way to do that right now. And, you know, biodiesel and renewable diesel reduce greenhouse gas emissions by, on average, over 70%. And so that is a way to achieve the administration's climate goals as well.”
Focused on the Farm Bill
Another big focus during Commodity Classic this week is the 2023 Farm Bill. There’s debate on whether Congress will pass a Farm Bill yet this year, but commodity groups are currently making their voices heard, outlining key priorities within the legislation.
“The first thing, that message that we have been delivering, is that we need Congress to have an adequately funded, on time Farm Bill, and we say adequately funded because we recognize that there's the need out there that the current farm bill actually needs more resources,” says Censky.
Currently, most messages out of Washington point to less funding for the Farm Bill this year, but that’s not stopping ASA from outlining why agriculture needs more resources for the next Farm Bill, not less.
“We're actually working very hard with other farm groups, and we've been leading an effort with other commodity and farm groups, with a budget message to the budget committees, letting them know that that the agriculture committees are going to need more resources,” says Censky. “We're hopeful that they can get more resources. But we're also realistic that it's going to be tough to try to get those additional resources.”
Censky says the first priority is to fully protect crop insurance, as he says that’s soybean farmers most important risk management tool. The other priority is to improve the safety net for soybeans.
“Even when we had the China trade war and U.S. soybean exports plummeted, the safety net, the ARC or the PLC programs, did not kick in. Soybean farmers did not receive any payment. And they had to rely on ad hoc payment,” says Censky.
Within the Farm Bill, ASA also would like to see:
- A doubling of the market access program (MAP) and foreign market development funds; funding for those programs has been stagnant for 20 years, Censky says.
- Voluntary conservation measures that focus on working lands.
A Push to Increase Demand Through More Market Access and Trade
While the Farm Bill and renewable diesel are urgent issues for ASA, soybean growers see the continued need to grow demand around the globe. That's why ASA wants to see a focus back on trade.
“Number one, we would love for the administration to begin talking about trade agreements that involve market access tariffs,” says Censky. “The administration, so far, has just said that they want to address the sanitary and phytosanitary, or some of the technical rules. We're supportive of that, but really, what we need is market access.”
Censky says U.S. farmers export more than half of the crop grown, which is why expanding market access is a focus for ASA. It comes at a time when USDA projects U.S. agricultural exports to decline by $2.5 billion from 2022 to 2023. As a result, USDA forecasts the U.S. trade deficit to grow to $3.5 billion, the second largest since 1990.
“The overall trade numbers just came out, and the U.S. is running an agriculture trade deficit for the first time in many years,” says Censky. “And normally, in agriculture, we enjoy a huge surplus, a positive balance of trade and agriculture. And so I think that really underscores the need for the administration and Congress to get going on new trade agreements that involve market access.”
ASA says their grower members want to see the administration enter back into talks with the Trans Pacific Partnership (TPP). The original proposal was between 12 Pacific Rim countries and the U.S. While signed in February of 2016, it was not ratified. Strong opposition came from both Democrats and Republicans. In January 2017, new elected President Donald Trump then officially withdrew from TPP.
The remaining countries moved forward with a new trade pact, what’s now called the Comprehensive and Progress Agreement for Trans-Pacific Partnership.
“We've seen the European Union and China, they're striking new trade agreements, and the U.S. has been left behind,” says Censky. “The last time we had a new trade agreement was over a decade ago, other than the USMCA that had been updated. And so we really need new market access.”
Censky says Southeast Asia is one ASA views as a high growth market. He also thinks soybeans could also see a surge in demand if a trade agreement was reached with that area, allowing market access to countries like Vietnam, Thailand, Indonesia and the Philippines.
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