Sustainable aviation fuel and renewable diesel may be the ticket to eliminating the U.S. dependence on China for soybean purchases. The Biden administration is accelerating its efforts to reduce the carbon footprint of the nation’s transportation system. And as a result, soybean growers could soon cash in on a new opportunity around low carbon fuel standards (LCFS).
The growing renewable diesel and sustainable aviation fuel industries are a social issue—not a mandated issue, says Dan Basse, president of AgResource Company.
“We need to double U.S. soybean oil supplies, going from 25 billion pounds to close to 50 billion pounds by 2024. That’s going to take an increase of U.S. crushing by about 60%,” he says. “We will need more soybean acres each year.”
Here’s Why the Jump in Acres Won’t Happen Immediately
The timing for any impact on acres will likely be the 2023 growing season at the earliest. That’s because future growth will come from converting petroleum refineries to produce bio-based fuels. Big oil companies are making investments now and forming partnerships in the process. One example is a new partnership between Chevron and Bunge to expand soybean processing capabilities to keep the renewable energy refineries running.
For 2022, Pete Meyer, head of Grain and Oilseed Analytics, S&P Global Platts, forecasts the corn and soybean combined acreage pool at a maximum of 182-183 million acres. “As far as the mix, we see corn acres down around 3 million acres due to logistical challenges associated with, and the high prices of, nitrogen-based fertilizers. The reverse is expected in soybeans, where we see a 3 million acre increase to 90 million.”
When It Does Happen, It Will Impact Smaller Operations the Most
The farmers with the most focus on corn and soybean acres have an operation that is less than 500 acres, according to Farm Journal’s 2021 Farmer Grower Decision Survey. The larger operations tend to include other crops like wheat in addition to corn and soybeans. But Meyer says that S&P Global Platts does not see a possibility for corn and soybeans to pull from wheat, sorghum or cotton, due to their high prices.
Farmers Will Make Decisions the Way They Always Have
Cash flow and profit potential drive farmer decisions more than anything else, according to Farm Journal’s 2021 Farmer Grower Decision Survey. The top five factors are listed below. Respondents also cited labor implications and agronomics in their decision making.
The Market Opportunities are Strong
Meyer says the potential is so large, renewable diesel and aviation fuels made from soybeans has the potential to be bigger than what ethanol was for corn in the first couple of decades of the 2000s. “The difference with renewable diesel and sustainable aviation fuel is that it’s not an additive,” says Meyer. “It’s not like biodiesel, where you add 10% biodiesel into your regular diesel and it gets pumped into your car. This is 100% fuel.”
In addition to Southwest Airlines, Delta and United have also made commitments to using sustainable aviation fuel. These companies are on board with renewable diesel:
- Chevron partnering with Bunge
- Love’s entering a joint venture with Cargill
- Marathon partnering with ADM
- Phillips 66
