When Susan Stroud talks with farmers, she focuses on a readiness for change.
“We need to embrace it instead of be so resistant because we’re constantly seeing changes we go through,” she says.
In her regular commentary for No Bull Ag, Stroud highlights the current trends and transformative moments with the key drivers for market movement.
She’ll also share her insights and perspectives at the 2025 Top Producer Summit, Feb. 17 to 19 in Kansas City, Mo. Click here for the full agenda and to register.
One example of transformative change to is the biofuels build out with the Renewable Fuels Standard in the mid-2000s.
As for where the next wave of change will come from, she says two questions have to be answered.
“One is where’s the policy dictating that we go? And then how is the industry adjusting?” she says. “At the end of the day we have very green initiatives. It’s not just here in the U.S., but it’s worldwide. The most economical way to reach those green goals is by utilizing crop based biofuels. It’s a matter of us moving forward and just kind of adjusting to this new reality where grain and oilseeds have a new type of demand.”
Regarding the current state of biofuels, tax credits, and feedstock demand, Stroud sums it up at “mass chaos.”
“We had waited forever for guidance for 45Z and also for this updated greet model. It was so exciting when it was released. But the issue is that it’s not a final rule. In fact, we’re just at the beginning of a comment period,” she says. “This is something that was set forth by the prior administration. So it doesn’t mean anything at the end of the day. Now the bad part is that this is all that the industry has to go off of right now, and so we have to go on business as usual, proceed forward, based on what was given to us by the exiting Biden administration.”
She adds in addition to the Inflation Reduction Act tax credits, the other question in the biofuels market is the Renewable Fuels Standard Required Volumes, which are scheduled to be announced in March, but the actual timing is uncertain.
There are three big transformations for biofuels in 2025:
- “We lost the 40A tax credit, so no more $1 blanket on blending of biomass based diesels. Now we’re in this new regime of your tax credit– or your subsidy–It’s based on the carbon intensity reduction. Waste products like used cooking oil and tallow will command a higher subsidy than a crop-based biofuel,” Stroud says.
- “With 40A gone, we’re also losing incentive to import biomass based diesel. So in ‘24, let’s just call it a rough number of 1 billion gallons of biomass based diesels imported into the U.S. That’s nearly 20% of all supplies. So that leaves a big hole–one in every 5 gallons of supplies. That’s a big deal,” Stroud says.
- “With we have a lot of industry groups that are very happy to see this finally come to fruition. 45Z is not providing a tax credit for fuels that are made out of imported used cooking oil because we’ve had so many issues–we don’t want “used cooking oil” when it’s it’s not actually used and it’s predominantly palm, or it’s mislabeled,” Stroud says.
But she highlights one crop-based feedstock is excluded.
“Canola oil did not make the cut. So when you combine the fact that we have fuels that are made from imported used cooking oil plus any biomass based diesels that are made of canola, They are not going to qualify for the subsidies in 45 Z. That’s nearly 1/3rd of our feedstock supplies,” Stroud says.
Currently, soybean oil is winning by default because of its supply availability. And Stroud thinks there’s a floor in the soybean market because of the little that is known when it comes to the tax credits.
“We just have a mess going forward,” she says. “The bad thing in any market—including ag markets—is uncertainty. There are two outcomes. You can have uncertainty kind of like when Russia invaded Ukraine, and we saw wheat go into the teens. Or you can have uncertainty like what we saw happen to soybean oil at the end of 2024. We kept grinding lower because no one knew,” she says.
Another example of transformational change is the developments around global trade.
“Just like what we saw in the in the first terms, we had a lot of days where we would wake up to double, digit down days where you thought that the world was ending, and then fast forward a bit, and we would have these double digit up moves, and I think you have to learn to try to pull some of the emotion out of it and take advantage of those up days, and also in the in the interim, remind yourself that you’re managing risk,” she says. “We’re entering this new frontier of unknowns, and there’s nothing that’s off the table with him (Trump).”
With fast-paced trade and tariff news, for example, the quickly developing Colombia situation last weekend and this weekend’s pending tariff implementations for Canada, Mexico and China, Stroud encourages farmers to stay grounded in information—rather than play into the emotion.
“Buy the rumor; sell the facts,” she says and reminds farmers: “At the end of the day Brazil is absolutely kicking us up one side and down the other when it comes to soybean production and soybean exports.”
