Fuel

How McCarty Family Farms Hedges Fuel Costs to Protect Dairy Margins

Fri, 08 May 2026 13:46:42 GMT

The great rebalancing of 2026 has taught dairy producers a vital lesson: You cannot control the wind, but you can certainly adjust your sails. While much of the industry’s focus remains on milk checks and component values, a silent predator often lurks in the shadows of the balance sheet — the fuel pump.

For an operation like McCarty Family Farms in Rexford, Kan., the 2025 Milk Business Leader in Technology Award winner, which milks thousands of cows across multiple states, the scale of production is matched only by the scale of its energy requirements. With feed trucks, tractors and skid steers running 24/7, fuel is not just a line item; it is the lifeblood of the operation. And in an era of global energy volatility, leaving that lifeblood to the whims of the spot market is a risk Ken McCarty, co-owner and manager, is unwilling to take.

The Math of the Spike

To understand the McCarty strategy, one must first understand the stakes. On a modern, large dairy, the equipment never stops. The sheer volume of TMR moved and the constant management of manure requires a fleet that consumes thousands of gallons of diesel every week.

For large herds, like McCarty’s, a 50¢ spike in diesel can derail a quarterly budget. In reality, that half-dollar move isn’t just an inconvenience; it represents a massive shift in capital that could have been reinvested in herd health, technology or labor. By locking in fuel prices, McCarty isn’t just buying diesel; he is buying the psychological and financial stability required to manage a complex organization.

The 18-Month Horizon: A Layered Approach

The McCarty strategy is defined by its proactivity. While many producers wait for a good day at the local co-op, McCarty and his team are looking 12 to 18 months into the future. They don’t view fuel procurement as a single transaction but rather as a continuous process of layering.

The process begins with a deep dive into data. Working closely with their fuel seller, they evaluate historical usage patterns. They don’t just look at what they used last year; they account for upcoming changes, whether that’s an expansion in acreage, a shift in equipment efficiency or a change in the beef-on-dairy program that might increase hauling requirements.

Once the known demand is established, the layering begins. As forward months become available on the market, the McCarty team begins to book physical gallons. The goal is to reach approximately 90% coverage by the start of the budget year on Jan. 1.

Mitigation, Not Speculation

Perhaps the most important takeaway for other producers is the McCarty philosophy on winning. In a world of high-frequency trading and market gurus, it is easy to fall into the trap of trying to time the bottom of the market. Ken McCarty is quick to dispel that notion.

“We have never viewed this as a money-making strategy,” he says. “Instead, it is purely a risk mitigation strategy.”

For McCarty, the goal isn’t to hit the absolute lowest price of the year — a feat that is more about luck than skill. Instead, the benchmark is historical consistency. If the farm can land in the bottom third or bottom half of the 5- to 10-year historical average or even just maintain consistency year-over-year, the strategy is a success. This consistent-cost model allows the farm to set its milk margins with confidence, knowing that this large input on the farm is already settled.

The Hidden Exposures

Even with 90% of their consumed fuel locked in, McCarty acknowledges the limits of the hedge. The farm remains exposed to indirect fuel costs — the market effects on purchased goods and, perhaps most significantly, milk freight increases.

This distinction is crucial for producers to understand. Locking in the diesel for your own tractors doesn’t protect you from the fuel surcharges applied by the third-party haulers moving your milk or the trucks delivering your distillers grains. This reality reinforces why being aggressive on the fuel you can control is so important; it narrows the window of vulnerability on the variables you cannot control.

Beyond the Contract: Efficiency as a Hedge

While forward contracting provides financial protection, McCarty is also focused on the physical side of the equation: consuming less. Every gallon of diesel not burned is a gallon that doesn’t need to be hedged.

The farm is constantly searching for ways to reduce its energy footprint. This includes everything from optimizing feed routes to reduce idling time to investing in newer, more fuel-efficient equipment. In this view, energy efficiency is the ultimate long-term hedge. It is a permanent reduction in exposure that pays dividends regardless of what happens in the energy markets.

“We have lived through times like this in the past and have no desire to repeat it, so ultimately, if we can be in the bottom third or bottom half of the 5- to 10-year historical average, or at least consistent year-over-year, then we are satisfied,” McCarty shares. “Of course, we are constantly searching for ways to consume less fuel and energy in general as an additional method of reducing our exposure to energy markets.”

Lessons for the 500-Cow Producer

While the McCarty scale is vast, the principles are entirely scalable for a modern 500-cow operation. Whether you are milking 40,000 or 500, the great rebalancing of the market means that margins are found in the details.

Compeer Financial ag economist Megan Roberts concurs with McCarty and says hedging isn’t about hitting the top or the bottom of the market; it’s about avoiding the economic risk of doing nothing.

“Risk management strategies, including hedging, are less about predicting the market and more about carefully managing exposure, using consistent, incremental decisions to smooth volatility in a way that fits the needs of your dairy operation,” she says. “Every farm is different, but in today’s environment, having a clear plan in place and following it with discipline is a wise strategy.”

In the end, the McCarty’s approach to fuel is a reflection of its approach to dairy farming as a whole: disciplined, data-driven and focused on the long game. By taking the volatility of the energy market off the table, it allows McCarty’s to focus on what truly drives the farm’s success: the health of the cows and the quality of the milk.

In a year where milk prices are shifting and trade policies are in flux, the lesson from McCarty Family Farms is clear: Protect what you can, manage what you must and never leave your margin to chance.

Diesel Prices Are Breaking Records Across Multiple States, And Relief May Not Come in 2026

Wed, 06 May 2026 12:53:35 GMT

On Tuesday, President Trump stated that high gasoline prices are a “very small price to pay” for the ongoing war with Iran, arguing they are necessary to prevent Iran from obtaining a nuclear weapon. He predicted prices will “come crashing down” once the war ends. But for farmers and ranchers, diesel prices have risen more than gas, putting a further strain on already high input costs for 2026.

Trump on Oil Prices:

I looked today, it's like at 102 and that's a very small price to pay pic.twitter.com/2V8LC93wFj
— Acyn (@Acyn) May 5, 2026

To start the week, diesel prices went on another run with the national average diesel price is just 20 cents away from reaching a new all-time high. And across the country, a growing number of states aren’t waiting to get there. About six states are already seeing the national average price of diesel reach record highs.

From the Great Lakes to the West Coast, roughly a half dozen states have already smashed previous records, as a late-April dip in prices quickly faded and a fresh surge took hold.

“Diesel now averaging about $5.65 a gallon nationally. That is only about 20 cents away from a new all-time record high,” says Patrick De Haan, head of petroleum analysis at GasBuddy . “So even though we had that short-lived break, we’re right back knocking on the door of records again.”

That “break” didn’t last long. De Haan says even though diesel prices saw a bit of a respite for April, with even prices starting to trend down in mid-April, those prices re-accelerated in the last week.

New records for diesel in:
Michigan, $6.01
Illinois, $6.01
Wisconsin $5.67
(Indiana 0.2c/gal away), $6.03
(Ohio ~19c/gal away), $5.93 https://t.co/DV0387vvMR
— Patrick De Haan (@GasBuddyGuy) May 5, 2026

Now, the rally is showing up in state-by-state records, especially in the Midwest.

“Looking at it state by state, Great Lakes states have seen some tremendous refining issues that have really caused prices to rise dramatically,” he says. “Michigan has now set a new all-time record high for diesel over $6. Indiana is just a few tenths of a penny away from setting a new all-time record. Illinois has set a new all-time record. Wisconsin has set a new all-time record.”

And it’s not just a regional story. States in the West were some of the first to not just see the highest prices, but now also hit record levels.

“Out on the West Coast, Arizona set a record a couple of weeks ago, and Washington state is at an all-time record,” he adds. “So there are probably about a half dozen or so states that have set new all-time records, and again, the national average itself is just 20 cents away.”

Perhaps the most telling shift, though, is there’s no longer a low-price refuge.

“No states any longer have diesel averaging below $5 a gallon,” De Haan says. “Texas was the last holdout, and it now is above $5 per gallon. So across the board, $5 diesel is now essentially the floor, and in some areas, that’s actually the cheaper end of the spectrum.”

At the high end, prices are reaching extremes with California’s average diesel price now surpassing $8 per gallon.

Global Tensions Cloud Relief Outlook

With prices continuing to climb, farmers are looking for relief. What would it take to reverse course? That answer remains tied to global uncertainty.

“Relief may be a little bit elusive,” De Haan admits. “It really just depends on the daily developments in the situation between the U.S. and Iran—whether the Strait is open or not, or whether we’re in phases of escalation.”

The Strait of Hormuz remains a critical chokepoint for global energy supply, moving roughly 20 million barrels of oil per day.

“Nothing else matters to the oil market more than this waterway,” he emphasizes. “We’ve seen attacks that have pushed oil prices higher, which in turn pushes diesel wholesale prices up. You may get a little bit of day-to-day relief, but there really is no ‘coast is clear’ until there’s some sort of definitive resolution.”

And even then, he says a turnaround won’t happen overnight.

“If there is a definitive signal to the market, if the Strait reopens and both sides are aligned, prices could start falling within 48 hours,” De Haan explained. “But the rate of decline is likely to slow after that initial drop.”

Prices Likely to Remain Elevated Through 2026

Not only is the rate of decline projected to be slow, but De Haan says diesel prices aren’t likely to drop back to pre-war levels by the end of the year.

“Roughly half of the increase we’ve seen over the last couple of months could come down within the first few months of positive news,” he said. “But the other half could take many more months. We may not get back to pre-conflict diesel prices until late this year—or even into 2027.”

For agriculture, that prolonged stretch of elevated prices carries real consequences.

“When you look at what comes out of a barrel of oil, diesel only makes up about 25%,” De Haan explained. “Gasoline is a larger portion, so it’s been less impacted. Jet fuel, which is an even smaller share, has been hit the hardest. So it’s almost inverse to how much is produced.”

Why Diesel Is Climbing Faster Than Gasoline

If it feels like diesel prices are rising faster and hitting harder than gasoline, there’s a reason rooted in how a barrel of oil gets used.

“Diesel has seen more of the sticker shock compared to gasoline,” says De Haan. “And a lot of that comes down to what comes out of a barrel of oil.”

Not all fuels are created equally in supply. Gasoline makes up the largest share of a refined barrel, while diesel represents a smaller slice, making it more vulnerable when supply is disrupted.

“Gasoline is the top product flowing out of a barrel of oil, so it’s been the least impacted,” De Haan explains. “Diesel, on the other hand, only accounts for about 25% of a barrel, so it’s been more impacted when there are supply issues.”

That imbalance becomes even clearer when looking across the full spectrum of refined fuels.

“The most significant impact has actually been to jet fuel, which is only about 9% of a barrel,” he adds. “So if you look at it inversely—the smaller the share of the barrel, the bigger the impact we’re seeing right now.”

For agriculture, that dynamic matters more than most sectors.

Diesel isn’t optional on the farm. It’s essential. From planting to harvest, it powers tractors, trucks and the supply chain that moves commodities across the country.

“Diesel is the fuel that drives agriculture,” De Haan say. “And that’s why these price increases are so impactful, not just at the pump, but all the way through the economy.”

And while prices are already elevated, the full effect is still working its way downstream.

“Consumers really haven’t even seen the full onset of some of these higher prices yet,” he adds. “That’s going to continue to trickle through in the weeks ahead.”

Demand Holding...for Now

Even with these high prices, so far, demand hasn’t shown many signs of slowing.

“We have not seen much meaningful decrease in demand yet,” De Haan says. “We’ve seen very little, if any, diesel demand destruction so far, which tells you the economy is essentially preparing to pay these prices because it still needs the fuel.”

But there are warning signs ahead.

“If diesel nationally hits $6 a gallon, that’s likely when we start to see consumption slow,” he says. “For gasoline, that number is about $5 a gallon. We’re getting very close to those thresholds.”

Until then, the pressure continues to mount. And for farmers heading deeper into the growing season, that pressure is becoming harder to ignore.

The New Biofuel Boom? Historic RFS Mandates Drive 2 Billion-Gallon Expansion

Thu, 02 Apr 2026 17:22:41 GMT

The EPA’s finalized “Set 2” rule under the Renewable Fuel Standard is doing something rare in U.S. biofuel policy: it is not just stabilizing the market, it could jolt it.

With blending mandates for 2026 and 2027 set at historic highs , including a more than 60% jump over 2025 levels for biomass-based diesel, the rule is already being read across the industry as a catalyst for a new expansion cycle — one that could ripple from fuel producers back to soybean fields, livestock operations and emerging oilseed crops.

A Demand Shock, But By Design

“It sure feels like it,” says Matt Upmeyer, director of feedstock sourcing and strategy at Montana Renewables, when asked whether the policy signals the next biofuel boom. “We received a strong RVO, adding about 2 billion gallons of biomass-based diesel demand, and that’s a huge increase. And certainly feedstock demand is growing as well. That 2 billion of biomass-based diesel represents about 15 billion lb. of feedstock for the biodiesel and renewable diesel producers. And that really translates directly back to farm and agriculture growth as well.”

From Underperformance to Full Throttle

For an industry coming off a sharp downturn, where biodiesel production fell significantly in 2025 and facilities idled or slowed, the scale of the mandate is not just notable — it is corrective.

“I mean, I think it is realistic,” Upmeyer says of the aggressive growth targets. “The industry is poised to meet that demand. We’ve got capacity. The renewable industry, which is both biodiesel and renewable diesel, has a combined capacity of probably around 7 billion gallons. So meeting that mandate, I don’t think is a problem.”

But meeting it will require a fundamental reshuffling of how feedstocks move through the system.

“We will definitely see some changes and shifts in the feedstock flows,” he says. “We talked a little bit about the soybean oil increase and the production of soybean oil through crush. I think also you’re going to see the tallow industry and choice white grease, the hog industry, as well as poultry fat — all of those are going to find their way into the renewable diesel and biodiesel in a greater way. I think we’ll maximize all of the available low-CI feedstocks, including distillers corn oil. And then from there, obviously, the demand will be filled with soy.”

That expansion does not stop at just soybeans. Upmeyer says there are other crops that stand to benefit from this newly released RFS.

“I think that as we expand the amount of biomass-based diesel we produce, we’re going to start looking to other feedstocks as well. So canola, there’s a fair amount of canola grown in the United States, and certainly our neighbors to the north are large canola producers,” Upmeyer says. “I think that will become an integral part of what we do. And then there’s other low-CI feedstocks that are sort of on the cusp, things like camelina and different things like that will get attracted new attention right now to see how they may fit into the future mandates and production.”

If you look at the past year, biodiesel and renewable diesel facilities reportedly shut down or ran well below capacity in 2025, which led to a one-third drop in U.S. biodiesel production compared to 2024.

When asked if these new RVOs from EPA will reverse that trend and give them enough confidence to bring that production back online, Upmeyer says it should.

“The biodiesel industry got hit hard. Their production costs are higher than renewable diesel, and so they certainly felt that when we had a lower RVO under the Set 1 rule. I think we’re getting close to a point where these plants will start back up. Margins have improved dramatically.”

He adds nuance to that recovery, noting cost pressures still linger.

“Biodiesel producers have a slightly different process than renewable diesel,” he says. “They take fats, oils and greases, combine them with methanol and catalysts to make biodiesel. And methanol costs have shot up, right? So I think the marginal producers on biodiesel are still probably not super inclined to start up, but certainly the integrated biodiesel plants will be running hard. And I do believe that even the marginal biodiesel players will get a chance to restart those assets in the near term.”

A Policy Twist: The Half-RIN Question

One of the most debated elements of the rule — the proposed “half-RIN” provision for 2028 — adds another layer of complexity, particularly for feedstock sourcing and trade.

“We just couldn’t get our heads around the administrative burden that might be associated with a half-RIN,” Upmeyer says. “How do you account for feedstocks coming in from some Canadian origin, some domestic, some from foreign sources? So I think there was an administrative burden that was certainly problematic.”

“This is certainly in line with the administration’s desire to maintain energy independence in the U.S. and to have a U.S.-based and U.S.-centric market for our crop inputs and fuels,” he says. “So I think there were a lot of things that went into this. But at the end of the day, it’s still on the table for 2028. I don’t think there’s clear guidance yet, but it certainly left that door open to address this issue in the Set 3 rule.”

A Win for Agriculture

When asked if he would classify this is a “win for U.S. agriculture,” Upmeyer said the immediate impact of the record-high blending mandates for 2026 and 2027 is already clear to those closest to the supply chain.

“I think it’s a great win,” Upmeyer says. “Again, we’re really underpinning the demand for soybeans and crush. We’ve got a strong demand for the rendered products that come from the beef industry and hog industry. So, I think this is a win for agriculture and for the renewable fuels industry. We certainly applaud the administration’s commitment to energy independence, to the renewable space and ultimately to agriculture.”

Farm Input Costs Surge Amid Iran Conflict

Tue, 24 Mar 2026 14:59:01 GMT

The conflict in the Middle East is having a negative impact on input costs.

farmdoc daily recently reported significant price increases for various inputs, ranging from sulfate and DAP to diesel.

These rising costs are further stressing profit margins that were already tight or even negative. Unfortunately, the recent improvement in corn prices is not enough to offset the increases.

Higher Energy and Fertilizer Prices

The war involving Iran has closed the Strait of Hormuz. This has subsequently spiked many input costs for U.S. farmers as spring planting ramps up.

farmdoc daily reports a significant spike in on-farm diesel fuel. Prices are now working toward the record levels seen in March 2022, according to Nick Paulson, professor of agricultural and consumer economics at the University of Illinois.

“If we look at diesel relative to last year, we’re looking at more than a $1 increase relative to where we were at,” Paulson says. “An even bigger increase relative to some of the lows we were at prior to the conflict breaking out this year, closer to the $1.50 range in terms of that increase.”

(Farm Doc Daily )

Urea Hit the Hardest

Significant price hikes have also hit the fertilizer market. Currently, a quarter of global supplies pass through the Strait of Hormuz.

Urea is the category most impacted, Paulson says, with prices up 39% in that class alone.

“There will be cases where there’s 20%, 30%, 40% of the fertilizer needs that maybe were unpriced on individual operations; and so, you know, looking at cost increases for urea and the 25% to 30% range. Some of the other nitrogen sources and phosphorus products that farmers use increasing by five to ten percent.”

(Farm Doc Daily )

Paulson says even though some fertilizer products, such as anhydrous ammonia, do not come primarily from the Middle East, they are still impacted. This is because they are energy-based commodities.

“We’re seeing increases in many of the other common forms of nitrogen that farmers apply: anhydrous ammonia, liquid nitrogen. You know, the primary sources of phosphate and nitrogen in the DAP and MAP products that farmers use, and even seeing a tick-up in potash,” he explains.

(Farm Doc Daily )

Fertilizer in Place

The good news is a majority of farmers have fertilizer in place for 2026.

“One of the relative silver linings here is that a lot of the fertilizers that were intended for the 2026 crop may have already been applied in the fall; for those that are being spring-applied were booked ahead of time.”

Paulson doesn’t anticipate a significant cut in corn acreage for this spring. Instead, he believes it could be more of a 2027 story, depending on the duration of the war.

Diesel Prices Spike on Iran Conflict Just Ahead of Planting Season

Wed, 04 Mar 2026 15:56:32 GMT

Diesel prices spiked more than 60¢ combined on Monday and Tuesday.

It is a direct result of the supply cutoff through the Strait of Hormuz, says Alex Hodes, director of market strategy – energy with StoneX Financial Inc. Refined product movement is concentrated in the Strait, making this one of the biggest global disruptions for the oil market.

“A large amount of refined products, specifically diesel and jet fuel, transport through this Strait. That closure is causing panic in buyers of Middle Eastern diesel, one of which is Europe, which is kind of the primary maker of diesel prices globally. That’s dragging on NYMEX heating oil diesel prices as well,” Hodes says.

Nationwide Diesel Prices Up Sharply from 2025

After rising 10.8¢/gal. on Monday, the national average price of diesel rose another 8.1¢ Tuesday afternoon. It reached $3.929/gal. — a rise of almost 20¢ in two days, writes Patrick DeHaan, head of petroleum analysis at GasBuddy, in a post on X.

Data from the Energy Information Administration (EIA) shows the national average diesel price on Tuesday was up 31¢/gal. from a year ago.

Meanwhile on Wednesday morning, NYMEX heating oil futures were up nearly 68¢ from Friday at $3.26/gal. Diesel prices are based on these futures.

When compared to a year ago, NYMEX heating oil prices were up over 90¢/gal. and have risen $1.21 since December 31.

(Barchart )

They Could Climb Higher

Hodes thinks there is more upside potential for diesel fuel prices.

“Yes, I think there’s still risks that are in the market and have not really come to fruition quite yet. So ultimately, with the Strait of Hormuz closure, the question will be how long will that last,” Hodes says.

Some relief may come following a Tuesday afternoon post from President Donald Trump. He ordered the U.S. Development Finance Corporation to provide political risk insurance and guarantees for the financial security of all maritime trade at a reasonable price. He added that, if necessary, the U.S. Navy would escort tankers through the Strait.

While that will help lower the insurance costs to allow oil tankers to pass through the Strait, the shipping industry sees this as only a partial solution to the historic crisis.

“One other factor is that several Middle Eastern refineries have been attacked, and that’s over 1 million barrels per day almost offline due to those attacks. So, additional Middle Eastern refineries could be at risk, and that’s another bullish factor there,” Hodes says.

Diesel Prices Rise More Than Other Energy Products

He adds diesel has risen disproportionately more than other energy products. This is partly due to tighter global inventories.

“But the biggest one is that there’s more diesel products flowing through the Strait of Hormuz than gasoline or some of the lighter counterparts,” Hodes says.

And Asian refineries, particularly in Japan and China, have also announced they could reduce run rates at their refineries if the disruption lasts.

The Price Hike Comes at Crunch Time for Farmers

The higher prices come as diesel demand ramps up for planting.

“It is a tough time to lock in fuel costs specifically, you know, in the start of March now. So, it’s not a great time to be a consumer of fuel,” Hodes says.

Unfortunately, few farmers locked in diesel prices when they hit lows in December and early January. This was just before the polar vortex rallied prices.

It is another expense they can’t afford when farmers are moving into the 2026 growing season already facing slim-to-negative profit margins.

Control the Controllables To Capture More Bushels

Fri, 16 Jan 2026 19:27:18 GMT

A solid game plan addressing key fundamentals could be the most powerful risk-management tool farmers have going into the 2026 season, according to Randy Dowdy and David Hula. Here are four they encourage farmers to review and work on this winter:

Fuel The Crop Adequately

Hula stresses that even in low-margin years, you can’t cut corners on fundamental crop needs. He emphasizes using soil tests to manage N, P and K, looking at soil pH and applying lime where needed.

“When you think about where you’re spending dollars, you can’t waiver from that,” he says. “We have to cover the basics… there’s nothing that’s sexy about farming right now, [everyone’s] just trying to survive.”

Why Your Planter Is the Lowest Hanging Fruit for Yield

Randy Dowdy says the planter represents the “lowest hanging fruit” for yield improvement on 90% of U.S. farms.

“The planter is just not performing at the levels to reach the maximum potential that most farmers need to support and service debt,” Dowdy says.

He encourages growers to spend time in the shop, ensuring that every row unit is capable of delivering “picket fence” seed placement and performance. For Dowdy, this means every seed is placed at a consistent depth and spacing, emerging within a tight window of 10 to 12 Growing Degree Units (GDUs) of one another

“Does every seed have the same standard deviation between them, the placement from one seed to the next? Are they all singulated, and are they all coming up at the same time? If that’s not happening, that’s a big deal,” Dowdy says.

Consider Seed Size Along With Good Genetics

While every farmer is tuned into genetics, Dowdy and Hula say they can benefit from taking seed size into consideration, too.

One of the questions Hula says he often gets is, “What’s the best seed size to plant?”

After years of analyzing small rounds versus large flats, his philosophy has evolved into a practical rule of thumb.

“My answer now is simple: whatever your planter plants the best, that’s the seed you want to plant,” he says.

But that only works if you’ve done your homework on the meters—cleaning them, replacing worn parts, and calibrating them with actual seed to determine the vacuum and speed settings. Taking these steps can eliminate guesswork that leads to skips and doubles.

Generally, Dowdy observes that “Deere likes rounds, Precision likes flats.”

Both Dowdy and Hula caution against the temptation of buying plateless (mixed-size) seed just because it carries a lower price tag. Their take: if you use it, run side‑by‑side strips with good, graded seed so you can see the real yield cost.

“I’d really challenge [anyone using plateless seed] to plant some graded seed next to it… just so you could know what it’s costing you. It’s costing you money,” says Hula.

Take Only Calculated Risks, ‘Miss Small’

Dowdy says this is the year to “control the controllables” and stick with practices you know consistently pay. He warns that farmers can’t afford big mistakes in this economy. While he’s not afraid of trying new practices, he is afraid of not being profitable and not being able to service debt, so due diligence and ROI have to come first.

“If we’re going to have a fail, we don’t need to fail in a big way. We need to miss small in an economy like this,” Dowdy says. “I’ll put my big toe in the water, but it won’t be my whole foot and a bunch of acres.”

A Checklist For Reference This Winter

Here are additional highlights of recommendations Dowdy and Hula listed during their most recent Breaking Barriers With R&D podcast. These are not all-inclusive, but rather a starting point for farmers preparing for spring:

1. Soil and Fertility Basics

Lime and pH: Check pH by zone or grid. Apply lime only where pH is low. Avoid wasting inputs on ground at 6.5 or higher.
Manganese Alert: Watch for potential deficiencies in high pH spots (above 6.8).
P and K Strategy: Use recent soil tests to determine if Phosphorus can be reduced. Keep Potash a priority where base saturation justifies the spend.

2. The Planter Bar and Row Units

Parallel Arms: Inspect for “oblong” wear or side play. Replace any arms that aren’t tight.
Double-Disc Openers: Use a jig to check run-out. Only use blades that meet tight tolerances for a clean V-trench.
Gauge Wheels: Lift by hand. If they feel loose or drop instantly, adjust or replace the bushings and arms.
Alignment: Use a tape measure to verify every row is exactly on target (e.g., 30 inches). Ensure the toolbar is perfectly level front-to-back at operating height.

3. Seed Trench and Closing System

Centering: Run the planter across concrete. Ensure closing wheel marks are perfectly centered over the seed path.
Row Cleaners: Adjust “trash whippers” to move residue without gouging a deep furrow that could lead to erosion or crusting.

4. Seed and Meter Calibration

Match Seed to Meter: Generally, John Deere/ExactEmerge systems prefer rounds, while Precision Planting systems prefer flats.
The Meter Test: Replace worn belts and brushes. Calibrate meters annually on a test stand using your actual seed to determine the exact vacuum and speed settings.
The “Plateless” Warning: Avoid the temptation of cheap, mixed-size seed. If you use it, run a side-by-side strip against graded seed to measure the true cost of lost bushels.

5. Management Mindset

Miss Small: This is the year for calculated risks. Put your “big toe” in the water with new tech, but don’t commit the whole farm until you see a proven ROI on your own soil.
Check Strips: Always leave a clean, untreated check strip when trying new products for evaluation.

Hear the latest Breaking Barriers With R&D to learn more about Hula and Dowdy’s recommendations at Farm Journal TV and the YouTube link below.

What Does The Venezuela Situation Mean For U.S. Farmers?

Mon, 05 Jan 2026 22:28:18 GMT

The recent capture of Venezuelan President Nicolás Maduro and subsequent discussions about opening the country’s vast oil reserves to Western investment have sparked a key question within the U.S. agriculture sector: What impact will this situation ultimately have on farmers?

While current headlines focus on immediate geopolitical shifts and the actions of energy companies, the resulting ripple effects could eventually reduce U.S. farmers’ fuel expenses and other input costs, according to Bob Elliott, co-founder of Unlimited Funds.

However, Elliot emphasizes that even if Western oil companies successfully establish operations in Venezuela, it will take years to repair the damaged infrastructure there and bring a meaningful new supply of oil online.

“While Venezuela has some of the largest proven oil reserves in the world they have been chronically under-producing due to decades of underinvestment and poor management,” he explains. “As we transition to a point where maybe more Western oil companies come in, they could invest and create supply but that’s a story that’s going to take years to unfold.”

If Western investment is successful, Venezuela could eventually add “a few million barrels per day” to the world’s supply, a volume significant enough to help drive global oil prices lower, Elliott notes. Over time, this increase in supply could ease costs for diesel and gasoline, reduce input expenses (including fertilizer and freight) and generally improve the overall cost of production for farmers.

Don’t Expect Any Short-Term Relief

Despite the long-term potential, Elliott emphasizes that the current developments offer little to no immediate benefit for farmers and consumers.

“If you’re looking to get a little relief at the gas pump, it’s not going to happen from this effect anytime soon,” he says.

Furthermore, cheaper global oil, influenced by Venezuelan supply, would introduce a trade-off for U.S. oil-producing regions.

Elliott explains that “at $60 oil, we’re right on the cusp of break evens for the major U.S. oil producing regions.” The implication is that farm communities closely tied to oil and gas employment could experience economic fallout if domestic prices were to drop too sharply. Even so, Elliott believes farmers across the country would still welcome lower fuel and freight costs.

The U.S. Advantage In Refining Venezuelan Crude

From a logistical standpoint, Elliott points out that the U.S. refining industry is well-equipped to handle the specific type of crude that comes from Venezuela, which is a “sour” crude.

Sour crude is characterized by a high sulfur content (over 0.5%) and significant amounts of hydrogen sulfide, making it more corrosive and challenging—and thus more costly—to refine than “sweet” (low-sulfur) crude, according to the American Fuel & Petrochemical Manufacturers.

“We’ve got the refiners that can handle the sour crude that comes out of Venezuela down in Texas… we’re set up better to handle that kind of crude oil than any country in the world, really,” notes Chip Flory, host of AgriTalk.

Strategic Outlook for Farmers

Elliott points out that the Venezuelan situation is unfolding against a backdrop of wider geopolitical tensions, including concerns surrounding Iran and other global conflicts.

“All of those highlight some of the uncertainties in the geopolitical picture coming into 2026. It’s part of the reason why gold is getting such a bid to open the new year here,” he notes.

Elliott says the best course of action for farmers is to continue managing their fuel as if the market will remain tight—while simultaneously recognizing that, a few years down the line, new barrels from Venezuela could significantly shift the cost landscape in agriculture’s favor.

Hear the full conversation between Elliott and Flory on AgriTalk at the link below:

Senator Grassley Frustrated with Reallocation Schemes

Thu, 18 Sep 2025 20:36:56 GMT

Long-time ethanol supporter and Iowa Senator Chuck Grassley is reportedly in support of EPA’s proposal to fully reallocate 2023-25 renewable fuel blending volumes lost to SREs. But as for a second proposed option to reallocate half of the exempted volumes to 2026 and ’27 RFS requirements, Grassley says, “…every gallon needs to be reallocated, 100-percent.”

EPA has already announced granting dozens of SREs and partial exemptions. Grassley is frustrated, lamenting the push-pull nature of EPA’s RFS policy decisions and announcements, “…and it’s just irritating that we have to deal with these all the time,” said the Senator.

EPA’s latest proposal also allows refiners to buy renewable identification numbers, or RIN credits to make up lost volumes. Grassley complains RINS should not be a substitute for meeting Renewable Volume Obligations.
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EPA Draft Rule on Reallocation of RFS Refinery Exemptions Creates Possible Good, Bad, & Ugly Outcomes

Wed, 17 Sep 2025 11:44:50 GMT

The U.S. Environmental Protection Agency (EPA) today issued a draft rule regarding the potential reallocation of recently granted Renewable Fuel Standard (RFS) refinery exemptions (SREs) from years 2023 and 2024 as well as for the estimated amount SREs expected for 2025. Combined, this rule will impact over two billion gallons of renewable fuels demand. In the draft rule, EPA proposed reallocating 100% of the RFS exemptions or only 50%, while also soliciting comment on doing no reallocation at all. Any reallocated volumes would be added to the 2026-2027 RFS blending volumes under the proposal.

“Just a few weeks ago IRFA praised the EPA for committing to full reallocation in the 2026-2027 RFS rule, but that commitment should start now with 2023-2025 exemptions – not in 2026,” stated Iowa Renewable Fuels Association Executive Director Monte Shaw. “IRFA strongly supports the EPA proposal for full reallocation. The co-proposal that would reallocate only 50% of the SREs would be bad news for farmers. Make no mistake, not reallocating any RFS exemption is a direct cut to renewable fuels demand.” -source: IRFA Press Release
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Production Increase May Not Blunt Seasonal Diesel Strength

Wed, 10 Sep 2025 21:05:29 GMT

Oil prices have held fairly steady recently, thanks to a generally level supply and demand balance. Patrick DeHaan with GasBuddy.com reports OPEC+ announced plans to increase oil production in October by roughly 180,000 barrels per day. But DeHaan believes global demand will be able to soak up the increased supply, adding weight to gasoline prices.

Not so for diesel. When it comes to diesel prices, DeHaan expects the opposite saying, “As we see farmers now starting to harvest their crops, we could see diesel demand go up, and that could contribute to higher diesel prices in the weeks ahead,” also noting increased demand for heating oil as temperatures drop.
Read more from Pro Farmer.

Farmers, Truckers and Gear Heads Rejoice: EPA Rolls Out Streamlined Diesel Engine Fluid Guidelines

Tue, 12 Aug 2025 15:08:48 GMT

EPA is rolling out new guidance for manufacturers of farm equipment and other heavy-duty vehicles, removing regulatory red tape requiring diesel-powered farm equipment to reduce engine torque dramatically when a problem arises with the machine’s Diesel Exhaust Fluid (DEF) system.

You can read EPA’s statement on the announcement here.

The new rule making goes into effect immediately for all new diesel engines on model year 2027 machines. It should also be noted the new guidance from EPA is voluntary for all non road equipment. Ultimately, each manufacturer will have the right to choose whether it implements the new inducement strategy or maintains the status quo with its own machines.

To fix the problem for farm machinery already in the field, EPA’s new guidance, developed in collaboration with farm equipment manufacturers, will work to ensure necessary software changes can be made on the existing fleet.

(EPA)

EPA administrator Lee Zeldin says now all non-road equipment, like farm tractors, combines and sprayers, must be configured so there is no impact on engine power for up to 36 hours when a DEF system malfunction occurs. Once 36 engine hours have passed, a 25% reduction in engine torque will go into effect until the machine is serviced. If the farm equipment is not fixed within 100 engine hours, then a 50% reduction in torque is activated until the machine can be serviced.

Additionally, farm equipment can be restarted with full engine power three times for up to 30 minutes after inducement, according to the EPA release.

“This is the first crack in the ice toward saying we don’t need these expensive systems on our farm equipment,” says Ben Reinsche, owner, Blue Diamond Farming Company in Jesup, Iowa. “We don’t need to immediately shut off an engine or be restricted for 36 hours if you have DEF unavailable or a malfunction.

“This is a positive step and maybe a formative step toward saying that having these emission standards on farm or off-road equipment is not critically necessary,” adds Reinsche. “There are so many other things farmers can do that are planet positive, like using conservation and sustainability practices, rather than having an after treatment system on our diesel engines.”

Small Business Administration (SBA) leader Kelly Loeffler says the new rule will save 1.8 million family farms across America a staggering $727 million per year while offering “vital financial and operational certainty.”

“This announcement today is such a big deal, especially on behalf of our farmers and ranchers,” says USDA secretary Brook Rollins. “At a time when our ag sector is really hurting, our farmers have had to endure a 30% cost increase in inputs, and a $30 billion Biden-era trade deficit, these everyday regulations being lifted makes such a difference.”

The new guidance greatly reduces a machine setting known as DEF derating and allows operators more time to secure DEF, refuel and make repairs. The new guidance also reportedly retains the environmental benefits of Tier 4 engine and DEF regulations for farm equipment and trucks.

“Today we are taking another important step forward by undoing these diesel fluid guidelines that have hurt our farmers and small rural businesses,” says U.S. Senator Joni Ernst (R-Iowa). “Not only will these new guidelines save family-run farms hundreds of millions of dollars per year, but it is also just common sense, folks. No farmer should have their tractor come to a halt in the middle of a field due to Green New Deal-style regulations from Washington.”

How Did We Get Here?

EPA ushered in DEF requirements for large farm equipment when it enacted broader Tier 4 emissions standards in 2004.

Tier 4 Interim rules, which required DEF for farm machines 750 horsepower and up, then went into effect in 2008.

In 2015, EPA’s final Tier 4 regulations were put in place, meaning all new non-road diesel engines — regardless of horsepower rating — had to comply with new emissions standards.

Curious where your farm equipment is made? Check out Farm Journal’s “Who Makes What Where” feature to learn more.

Why Do Many Farmers Hate Using Diesel Exhaust Fluid (DEF)?

American farmers say they detest using DEF due to the challenges and additional fuel cost it tacks onto their operations.

Here are some reasons farmers aren’t big fans of DEF:

Higher Costs and More Maintenance: DEF adds on extra materials costs for machinery-based field work. Farmers must purchase large amounts of fluid, and the Selective Catalytic Reduction (SCR) framework that processes DEF is prone to malfunctions and expensive to repair. Often a simple-but-unexpected repair can pop up out of nowhere and end up costing farmers thousands of dollars and leave equipment inoperable.
Field Work Interruptions: If a tractor runs out of DEF or if the system breaks down, under the now-defunct previous guidelines engine power was greatly reduced, which is known by many farmers as “going into limp mode.” For farmers who rely on their equipment to operate consistently and reliably during planting and harvesting, any issue quickly becomes a major headache.
Storage Issues: DEF has a limited shelf life and is sensitive to temperature ups and downs. A quick Google search says DEF freezes at around 12°F and can degrade if stored in temperatures above 86°F. And who wants to look at a giant pallet of DEF cartons stacked in their machinery barn? Nobody, that’s who.
Contamination/Quality Control: DEF fluid must be pure and free of contaminants. Accidentally using the wrong type or getting foreign substances in the tank during refilling can wreak havoc throughout the system, leading to repairs and downtime.
Engine Performance Concerns: There are farmers who believe newer emissions systems, including those that use DEF, reduce the machine’s total power output and lower fuel efficiency.

Your Next Read: MAHA Policy Announcement Delayed, Agriculture Waits For Any Implications From Earlier Report

Lanzajet Production Facility to go Green

Mon, 11 Aug 2025 20:14:28 GMT

According to Bloomberg , the world’s first ethanol to jet fuel production facility expects to begin production in September. Lanzajet’s $200 million Georgia location received government funds to get production up and running and after some delay from equipment issues, the company’s CEO Chief Executive Officer Jimmy Samartzis said in an interview, “"My hope is that by the end of the third quarter we are fully operating. The modifications we made to the equipment that was hindering us, unrelated to the technology itself, should satisfy what we need.”

While the news of the world’s first ethanol to jet fuel facility is exciting, the majority of U.S.-grown corn does not meet low-carbon standards, forcing the company to test the facility using Brazilian sugarcane. The company says it will switch to American-grown feedstocks ‘as soon as possible.’

Once fully operational, the facility is designed to produce 10 million gallons of SAF and renewable diesel per year.
Read more from Pro Farmer.

Could EPA Decision Signal The Beginning Of The End For DEF?

Thu, 31 Jul 2025 16:16:02 GMT

Mike Berdo has strong words to describe his ongoing experiences using machinery requiring DEF ( Diesel Exhaust Fluid ) on his southeast Iowa farm.

“It has been an absolute nightmare, at least for us. Mechanics make trip after trip to do little stuff that’s very expensive to fix,” said Berdo, who produces grain and beef cattle near Washington. “We had planting delays last spring … little stuff that came from it and just seemed like [an issue to deal with] day after day.”

The ongoing mechanical issues and costs are why Berdo said he is “all for” EPA rescinding the 2009 Greenhouse Gas Endangerment Finding. The Finding has enabled the agency to regulate greenhouse gas emissions under Section 202 of the Clean Air Act and, in recent years, and launch requirements such as the use of DEF systems in diesel-powered engines.

EPA Draws A Line In The Sand
On Tuesday, EPA Administrator Lee Zeldin released a proposal to rescind the 2009 Finding.

If finalized, the proposal would remove all greenhouse gas standards for light-, medium- and heavy-duty vehicles and heavy-duty engines, EPA said in a follow-up press release .

The move would start with EPA’s first greenhouse gas standard set in 2010 for light-duty vehicles and those set in 2011 for medium-duty vehicles and heavy-duty vehicles and engines.

EPA said the proposal is expected to “save Americans $54 billion in costs annually through the repeal of all greenhouse gas standards, including the Biden EPA’s electric vehicle mandate, under conservative economic forecasts.”

Zeldin made the announcement to rescind the Finding in Indiana, alongside Energy Secretary Chris Wright, and called it the largest deregulatory action in U.S. history.

What The Decision Could Mean To Farmers
Specific to U.S. farmers, the proposal could potentially result in DEF systems no longer being included on new tractors and other heavy equipment using diesel-powered engines, said Chip Flory, host of AgriTalk, during a Farmer Forum discussion on Wednesday.

South Dakota farmer Ryan Wagner told Flory he has a wait-and-see perspective on how or whether the EPA proposal goes into effect. He anticipates that reversing the Finding will take considerable time and effort for EPA to implement.

“It took a long time with the interim engines and things to get into full DEF in the first place,” Wagner said. “I don’t know how long it would take to unwind all that and how quickly manufacturing will just take those systems right off, but it’ll be interesting to see what happens.”

To Wagner’s point, here’s a brief look back at some timing showing when DEF rolled out in agriculture and nonroad equipment and became mandatory . The regulations were phased in over several years based on the type of equipment and engine size:

2008: DEF became required for all new diesel engines with engine sizes over 750 horsepower.

2011: the regulations expanded to include equipment with engine sizes between 175-750 horsepower.

By 2015, all new nonroad diesel engines were required to be Tier 4 compliant and utilize DEF, regardless of equipment type or engine size.

As Wagner considers DEF, he noted its use in diesel engines has provided him with one benefit: “On the plus side, I do like that they don’t make the walls of my shop black. That’s been nice,” he said. “You can run them inside for a short time and not not feel like you’re breathing in a bunch of soot and making everything black.”

Expect Legal Challenges To EPA Decision
A number of environmental groups have already blasted the move by EPA, saying it spells the end of the road for U.S. action against climate change, according to an online article by Reuters .

Legal challenges from various environmental groups, states and lawyers are likely ahead.

That fact wasn’t lost on Flory and the Farmer Forum participants during the AgriTalk discussion on Wednesday.

“If this proposal is finalized, it’s going to start a lot of conversations … and the dominoes are going to start to fall, something that we need to keep track of, no doubt,” Flory said. You can hear the complete Farmer Forum discussion on AgriTalk here:

EPA will initiate a public comment period to solicit input. Further information on the public comment process and instructions for participation will be published in the Federal Register and on the EPA website .

Your next read: Right To Repair Granted? John Deere Launches Digital Self-Repair Tool for $195 Per Tractor

The Trump Administration Recently Proposed Record-Setting Renewable Fuel Volumes

Mon, 21 Jul 2025 21:12:27 GMT

The Trump Administration recently proposed record-setting renewable fuel volumes for 2026 and 2027. The proposal would set the highest overall numbers ever, including a 67 percent increase for biomass-based diesel compared to 2024.

Numerous ag industry organizations lauded the administration on its commitment to increasing renewable fuel production. Aaron Wetzel, Vice President for Production Systems with John Deere, highlighted the importance of this announcement for farmers but noted there is still work to be done to ensure the proposal is finalized. “The Administration’s recent proposal sets strong numbers for both conventional ethanol, largely produced from corn, and biomass-based diesel, such as biodiesel, made from oilseeds like soybeans,” said Wetzel.

EPA seeks input during its 45-day public comment period, which closes on August 8, 2025.
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Missouri Farmer Calls Ford Out for Abandoning Ethanol Flex Fuel in New F-150 Trucks

Mon, 31 Mar 2025 18:08:36 GMT

Missouri Corn Growers Association CEO Bradley Schad, who still helps out around the family farm in his spare time, is calling on Ford Motor Company to reconsider a recent decision he believes will cause long-term harm to U.S. farmers.

“They stopped selling new flex fuel vehicles, so now they don’t have a single new engine platform option for growers to purchase,” Schad says. “The F-Series truck is one of the most important vehicles that we have on the farm today. They’re trying to change that (series) to an electric fleet, and we don’t like that.”

Farm Journal reached out to Ford for comment via a contact form for media on its website. We will update this post if we hear back from anyone at Ford Motor Company.

According to Schad, Ford’s F-150 is not only the top-selling truck in the U.S., but also the top-selling used vehicle in the top five corn-producing states: Iowa, Illinois, Nebraska, Minnesota and Indiana. It is also No. 1 in a handful of ag-friendly states like Missouri, Kansas, Kentucky, Mississippi, the Dakotas and the Carolinas.

Model Year 2023 was the last iteration of the F-150 that Ford offered with the V8 5.0-liter Flex Fuel option. Schad, who is a longtime F-150 owner, says he’s not interested in criticizing Ford for the change. After all, recent regulations removed many of the manufacturer incentives that used to exist for flex fuel and E-85 vehicles.

Bradley Schad, Missouri Corn Growers Association

(Photo courtesy Missouri Corn Growers Association )

“We’re just trying to bring some awareness and work with Ford to change the legislation and regulations and help bring that (option) back,” Schad says. “We realize it’s not entirely their own fault necessarily, but work with us to pass some beneficial legislation that helps farmers and rural consumers purchase a more economical fuel and reduce our dependence on foreign oil.”

Schad says Ford is still supporting its higher-ethanol compatible engines in South America. Brazil, for example, has a minimum ethanol blend in its fuel of 27.5%.

The company’s chief truck-building rivals at GM still offer flex fuel as an engine option on new base models of the Chevy Silverado and the GMC Sierra. Ford, it would seem, is stepping away from the same farmers that helped catapult its trucks to the top of the auto industry, he argues.

(Photo courtesy Missouri Corn Growers Association)

“We need Ford to stand strong with farmers – the No. 1 customer base of F Series trucks in the nation. I don’t think there’s any business sector that buys more F Series trucks than the agriculture sector,” he says. “We need Ford to give us the option to use our own product and help build demand for corn-based ethanol.”

RELATED - Grassley: Farmers Can Feed And Fuel The World At The Same Time. It’s Not Either/Or

Schad is optimistic a long-awaited-but-yet-to-be-passed new Farm Bill will include some type of carve out supporting ethanol-based fuels. Republican Iowa Senator Chuck Grassley has also been advocating for year-round E-15 fuel availability for years. Grassley and Nebraska Senator Deb Fischer (R) reintroduced the Nationwide Consumer and Fuel Retailer Choice Act of 2025 in February. If passed, that bill would enable year-round, nationwide sales of ethanol fuel blends up to 15%.

“We need permanency and predictability with ethanol and biodiesel,” Grassley recently told AgriTalk host Chip Flory.

And while Schad admits he has heard all the critiques of ethanol-based fuels - subpar performance, increased engine problems, etc. - his experience is that higher ethanol fuels are clean burning, high performing and safe.

“There’s nothing more helpful to a farmer than having a strong truck with a strong fuel providing more horsepower and torque in these engines,” Schad says. “Octane is key, and we want to make sure to partner with everyone we can. Hopefully Ford is willing to help us pass some beneficial legislation that brings ethanol the ability to be produced and consumed across the nation.”

Today, U.S. Secretary of Agriculture Brooke Rollins announced USDA will release funding under the Higher Blends Infrastructure Incentive Program (HBIIP) for 543 projects totaling $537 million in 29 states. Established at USDA Rural Development during President Trump’s first term, HBIIP helps expand the production of domestic biofuels by helping fueling stations install the pumps, storage containers and other necessary infrastructure needed to offer biofuel options at the pump.

Your Next Read: Here’s Why 2025 Is The Time To Buy High-Horsepower Tractors, Auction Pricing Is Staying Strong

Sort Out The Biofuels Provisions Of The Inflation Reduction Act

Sun, 01 Dec 2024 14:00:00 GMT

Enacted in August 2022, the Inflation Reduction Act (IRA) restructured biofuels tax credits in three ways: extend the Biodiesel Blenders Tax Credit (40A), create a sustainable aviation fuel (SAF) tax credit (40B) and transition future biofuel tax credits to a carbon intensity (CI) (45Z).

“Both 40A and 40B become part of 45Z, transitioning blending to a production credit,” says Susan Stroud with No Bull Ag. “As the end of 2024 draws near, which is the end of 40B providing a $1 per gallon subsidy in the form of a blender tax credit for every gallon of biodiesel and renewable diesel blended into U.S. fuel supplies, oil share has somewhat been buoyed, as mandates are increasing at the same time we are disincentivizing fuel imports. This should spell more demand for soybean oil.”

As the hand off to 45Z nears, there’s a lack of clarity for the opportunity for farmers.

“USDA is trying to put guidance together to help the Department of Treasury with the 45Z rules,” explains Mitchell Hora, founder of Continuum Ag. “But climate smart commodities and low carbon feed stocks for biofuels are not the same thing.”

Whereas bundles were used with 40B and other previous programs are an all or nothing approach, Hora contends 45Z needs to use the Department of Energy’s GREET model.

“If bundles are used, it stifles farmer innovation — it waters down the impact,” he says. “We have to get this done right. The weight of this decision is massive. The ripple effect 45Z could have is tremendous.”

Legislation has been introduced to extend the biofuels tax credit through 2025 as we are still waiting on the Treasury to issue 45Z guidance.

Canada’s Renewable Diesel Market Impacted by Slumping Credits, U.S. Import Surge

Tue, 29 Oct 2024 20:33:25 GMT

Canadian renewable fuels producers are facing lower returns on new facilities due to a slump in British Columbia’s low carbon fuel standard (LCFS) credit market, a trend expected to persist amid a flood of imports from the United States. British Columbia’s LCFS credits fell to C$207 in July and C$350 in August, after trading above C$400 for more than two years previously. Tidewater said in August the slump hurt its ability to generate revenues, and blamed weakening prices on a surge in renewable diesel imports from the United States. British Columbia LCFS credit values rose to C$456 in September.

The British Columbia provincial government told Reuters it is not currently considering changes to the program, as credit prices naturally fluctuate based on supply and demand dynamics.

U.S. producers shipped at least 530 million liters of renewable diesel to Canada in the first six months of 2024, a jump from 151 million liters during the same period last year, according to data compiled by Will Faulkner, founder of industry analysis firm Carbon Acumen.

Canada has lagged the U.S. in setting up domestic renewable diesel production. British Columbia is the only Canadian province with an LCFS credit market, which helped encourage Calgary-based Tidewater Renewables to open the country’s first standalone renewable diesel refinery last year. Others are also betting on the credits to support construction of more facilities in British Columbia and other provinces. At the same time, the LCFS has made Canada an attractive outlet for a glut of U.S. renewable diesel.

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U.S. EPA Says It is Auditing Biofuel Producers' Used Cooking Oil Supply

Wed, 07 Aug 2024 13:56:28 GMT

The U.S. Environmental Protection Agency has launched investigations into the supply chains of at least two renewable fuel producers amid industry concerns that some may be using fraudulent feedstocks for biodiesel to secure lucrative government subsidies.

EPA spokesperson Jeffrey Landis told Reuters that the agency has launched audits over the past year, but declined to identify the companies targeted because the investigations are ongoing.

The production of biodiesel from sustainable ingredients, like used cooking oil, can earn refiners a slew of state and federal environmental and climate subsidies, including tradable credits under a program administered by the EPA called the Renewable Fuel Standard. But fears have been mounting that some supplies labeled as used cooking oil are actually cheaper and less sustainable virgin palm oil, a product that is associated with deforestation and other environmental damage.

The issue came into focus following a surge in used cooking oil exports from Asia in recent years that analysts have said involves unrealistically high volumes relative to the amount of cooking oil used and recovered in the region. The European Union is also investigating feedstocks over the fraud concerns.

The EPA audits began after the agency updated domestic supply-chain accounting requirements in July 2023 for renewable fuel producers seeking to earn credits under the RFS, he said.

“EPA has conducted audits of renewable fuel producers since July 2023 which includes, among other things, an evaluation of the locations that used cooking oil used in renewable fuel production was collected,” he said. “These investigations, however, are ongoing and we are not able to discuss ongoing enforcement investigations.”

U.S. senators from farm states have called for more oversight of biofuel feedstocks, saying federal agencies should be as rigorous in verifying imports as they are auditing domestic supply chains.

“The Biden administration has created vigorous standards to verify, not just trust, American producers, and it is imperative that the same scrutiny is applied to imported feedstocks,” six U.S. senators, led by Roger Marshall and Sherrod Brown, wrote in a June 20 letter to federal agencies.

Another letter from 15 senators to the Treasury Department on July 30 urged the administration to exclude imported feedstocks like UCO from an additional clean fuel tax credit program passed in the Inflation Reduction Act.

(Reporting by Leah Douglas in Washington; Editing by Richard Valdmanis and Matthew Lewis)

More Than Just U.S. Grown Feedstocks Qualify for 45Z, Farm Groups are Now Urging for That to Change

Thu, 18 Jul 2024 19:11:56 GMT

At a time when corn and soybeans are desperately searching for new demand, sustainable aviation fuel (SAF) could be the ticket for commodities to cash in. New production outlook numbers show just how big that new demand could be, but policy - and what qualifies for the tax credits and what doesn’t - seems to be the biggest roadblock so far.

According to Reuters, production capacity of SAF in the United States could jump by 1400% in 2024. The U.S. Energy Information Administration (EIA) says that jump will happen if all the previously announced capacity additions come online.

The EIA also anticipates domestic production of biofuels to increase by about 50% in 2024, which they say will be led by rising SAF production.

The White House has made it clear that this administration wants to see more SAF. Reuters also reports the Biden administration aims to meet all of the U.S.'s aviation fuel demand with SAF by 2050 and to supply at least 3 billion gallons of SAF annually by 2030.

What Qualifies for SAF?

The demand potential is huge, however, the issue today is policy, and what qualifies for SAF and how carbon intensity scores (CIS) are calculated. Currently, sugarcane from Brazil can be imported into the U.S. for SAF, and it has a lower CIS than corn produced right here at home.

Farm groups are now urging for that to change, advocating for domestic feedstock in tax credits. Four farm groups in a letter ( link ) urged the Biden administration to ensure that lucrative tax credits of up to $1.25 a gallon are available only for low-carbon fuels made from U.S.-grown feedstocks. They also recommended broadening the list of climate-smart farming practices to produce lower-carbon “sustainable” crops.

• Request for 45Z tax credits: Four farm groups urged the Biden administration to limit lucrative tax credits (up to $1.25 per gallon) to low-carbon fuels made from U.S.-grown feedstocks.
• Broader climate-smart practices: The groups also called for an expanded list of climate-smart farming practices for producing lower-carbon “sustainable” crops.
• Signatories: The letter was signed by: American Farm Bureau Federation; National Farmers Union; National Corn Growers Association, American Soybean Association.

Program details:
• 45Z Tax credits: These tax credits will be available in 2025 for sustainable aviation fuel (SAF). The administration has yet to issue regulations for these credits.
• 40B tax credits: Current guidance for 40B tax credits (for SAF produced from 2022-24) only qualifies a fraction of U.S. biofuels, lacking a domestic feedstock requirement and being rigid in its farming practice stipulations.

Concerns and recommendations
• Domestic benefits: The farm groups emphasized that without clear domestic feedstock requirements, the policy’s benefits might be diverted from American farmers.
• Expanded compliance options: They criticized the 40B guidelines for being too strict and suggested additional compliance options for qualifying feedstocks.

Related developments
• Pilot project announcement: CF Industries and Poet announced a pilot project using low-carbon ammonia fertilizer to grow corn for ethanol production, potentially reducing ethanol’s carbon intensity by up to 10%. The project will start this fall and continue through the 2025 harvest.

Will Electric Vehicles Actually Drive Down Prices at the Pump?

Thu, 11 Apr 2024 21:38:37 GMT

High inflation seems to have a withdrawal time. Even though the trend has been down for about a year, it still ranks as a top problem in the minds of many Americans. I think some of this is forgetting that even if inflation is slowing, overall prices don’t go down, they just go up more slowly.

Some prices, notably energy and food do both rise and fall, but the overall cost of living rarely drops. Right now, gasoline and eggs dominate our thinking about inflation. They are things we buy frequently, keeping them in our mind.

The good news gasoline is about where it was before the Ukraine war exploded the energy markets. There is a longer-term issue, however. We have likely passed peak gasoline consumption, and while you might think that would lower prices, oil companies are way ahead of us.

To be fair, when you see gasoline production virtually stopped growing in 2007 and predictions of slowly declining consumption from the EIA, there is little incentive to refine more. This is not about EV’s either.

Less than 1% of cars on the road are electric. It’s caused by improved mileage from more efficient engines. As older cars are replaced, the fleet mileage curve is locked into an uptrend. There are signs that vehicle miles driven may have plateaued as well.

These developments are not news to the oil industry, and it’s one reason no new refineries will likely ever be built in the US. In fact, to keep existing refineries running at capacity, US refiners have relied upon exports to replace fading domestic demand. It is good business for gasoline refiners to manage production to match demand forecasts. Older, smaller refineries are simply being shut down, reducing future refining capacity, and providing little idle capacity for demand surprises.

The bottom line for consumers as EVs become more popular , reduced gas demand likely will not lower prices as refiners constrict supply. In fact, supplies will probably decrease slightly faster than demand, keeping prices high. Any small mismatch between supply and demand could cause considerable price volatility.

This dispels one misconception I had – that EV’s would lower gasoline prices. They will eventually, but refiners are prepared. Strong gasoline prices will aid the economics of electrification as well as turnover to more efficient conventional vehicles.

How To Increase Your Potential SAF Tax Credits Now

Tue, 05 Mar 2024 22:54:02 GMT

With sustainable aviation fuel (SAF) tax credits beginning in 2025, the practices farmers use during the 2024 growing season will have a direct impact on their ability to take advantage of these incentives.

Mitchell Hora of Continuum Ag recently joined the Top Producer podcast to share the best ways to begin preparing now.

“If you’re selling to a biofuel plant, the company will be asking you for management information, and they might be just directly asking you for your carbon intensity score,” Hora says.

A grower’s carbon intensity (CI) score is calculated based on a tool from the U.S. Department of Energy called the Greenhouse Gases, Regulated Emissions and Energy Use in Transportation (GREET) model. The score can vary from field to field and year to year.

According to Hora, the GREET model tells growers what their crop’s carbon footprint is. And for the corn and soybeans that will be planted this spring, the footprint is already being made.

“To maximize this opportunity in the calendar year 2025, we need to optimize the carbon intensity of the corn that we’re going to grow, and the soybeans we’re going to grow in 2024,” he says. “The practices that we did this fall, like tillage, manure, fertilizer and cover crops directly impact the carbon intensity of this 2024 crop.”

The upcoming tax credits are dependent on the crop’s CI score, and the maximum credit would be $1 per gallon for ethanol and biodiesel and $1.75 per gallon for SAF. However, Hora doesn’t advise expecting to receive that value.

“I think it’s going to be tough to get there,” he says. “If my corn has a CI score of zero, it doesn’t necessarily mean the ethanol has a score of zero because there are a lot of other factors that go into it.”

He shares on average, U.S. ethanol has a CI score of 55.5 while U.S. corn has a CI score of 29 – though he has seen scores range from 44 to -13.

How to Find and Improve Your Score
As far as how to figure a CI score, producers can download the GREET model and input their data, but Hora warns it can get complicated. He shares Continuum Ag has developed a program that simplifies the model, though there is a fee to access it.

“It plugs in your typical fertilizer, typical yield, what you do for tillage, if you use cover crops, fuel usage, etc.,” he says. “Then we run the actual GREET model and as they create updates, we’re ready for it and just plug in the new model. All of our farmers will get their updated CI score.”

Once growers receive their CI scores, they may be curious how certain practices change it. Hora lists a few of the ways producers can lower their scores, such as:
• Using a cover crop ahead of corn
• Supplementing or replacing synthetic fertilizer with manure
• Reducing tillage by implementing strip till or no till practices
• Decreasing diesel fuel usage and energy inputs
• Improving yield to spread carbon input across more bushels

He also encourages consulting with your agronomist to find the steps you need to take next.

“We cannot just sit back and wait,” Hora says. “There 6 billion bushels of corn that goes into ethanol every year in this country, and right now all 6 billion bushels have a default CI score. We need to keep having the conversation of getting more farmers aware and getting more farmers to get their CI score.”

To hear more about SAF tax credits, listen to this episode of the Top Producer podcast.

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2024 Corn Price Outlook and Its Effect on Ethanol

Mon, 30 Oct 2023 18:36:34 GMT

U.S. corn has been the poster child for weak exports this year, but that’s good news for the ethanol sector.

“Just in the recent third quarter, we saw a healthy summer demand and a favorable ratio of ethanol price to corn and natural gas,” says Kenneth Scott Zuckerberg, CoBank lead economist for farm supply and biofuels. “That led to very strong profits.”

Zuckerberg adds ethanol profitability has risen substantially through the year: from $0.07/gallon in January all the way to $0.79/gallon in September.

Looking to 2024, several factors are leading economists to believe the price of corn will keep ethanol profits steady in the near future.

Price of Corn is Biggest Swing Factor
Zuckerberg shares the average price for 2024 corn futures as of mid-October was $5.17/bu., but USDA is forecasting $4.95/bu.

“That $4.95 is quite a bit lower – about 5% below what the futures market is telling us,” he says. “So that provides us a signal that ethanol profits might be a bit better.”

Research from the University of Illinois is predicting an even lower average price.

“The probability, at least based on the U of I work, is that U.S. #2 yellow corn could trend lower, specifically toward $4.61 per bushel rather than the $4.95 USDA is predicting,” Zuckerberg says.

Another factor causing economists to predict lower corn prices is the comparison of stocks-to-use and average corn price.

Andrick Payen, grain and oilseeds analyst at Rabobank, shares that though yield estimates from USDA have lowered, production is still high and corn stocks show to be building.

“We do have a massive acreage of corn that has helped U.S. production,” Payen says. “We’re likely to see stocks replenish and that’s what is keeping corn prices lower.”

The last time corn stocks were at this level – between 2016 to 2020 – the price of corn was below $4.00.

Zuckerberg shares he isn’t sure if the $4.61 level will be hit during 2024, but the stocks are a good indicator of the direction prices are headed.

A Look at What’s To Come
Despite the typical seasonal slowdown in usage during the winter, Zuckerberg says the environment for ethanol looks favorable for the next three to six months.

The risk for next year, however, lies in the chance of overproduction.

“It’s a funny industry and when you have record margins, sometimes undisciplined players push the envelope,” Zuckerberg says. “Overproduction by certain players seeking to capture excess margins would result in excess supplies and depressed profit margins.”

In the longer-term outlook, the increased adoption and usage of all-electric vehicles weighs on the ethanol industry. However, there are two potential offsets to that loss for producers.

“Higher ethanol blends will mitigate a portion of that demand destruction,” Zuckerberg says. “There is also the potential for an exciting encore performance for ethanol in the form of sustainable aviation fuel.”

Crude Awakening: Rising Oil Prices Complicate Fed's Rate-Hike Decisions

Wed, 20 Sep 2023 21:16:16 GMT

As brent crude futures soar toward $100, it’s creating a new battle in the Federal Reserve’s effort to fight inflation. One money manager warns another rate hike is likely.

Brent crude futures, the international energy benchmark, are on track to rise by 26% this quarter having climbed to about $95 a barrel. On Tuesday, they added 0.4%, putting prices on track for a four-day streak of gains and rises in 13 of the past 16 trading days. West Texas Intermediate futures, the U.S. benchmark, have jumped 29% this quarter to just over $91 a barrel.

Gasoline prices are already on the rise to a national average of $3.88 a gallon in the U.S. from $3.68 one year ago, AAA said. Gas costs jumped 11% from July to August, driving more than half of overall inflation for the month.

Meanwhile, the price of diesel, which often fuels trucks and factories, has soared even faster, especially in Europe. In the U.S., the average price is $4.58. Data from Britain this morning showed inflation fell faster than expected last month, but rising fuel prices were an outlier to that trend.

U.S. oil stockpiles fell by 5.25 million barrels last week, the API is said to have reported. That would bring holdings to the lowest in more than nine months if confirmed by the EIA today. Meanwhile, Goldman Sachs today raised its price target for Brent crude to $100, joining a growing club that predicts triple-digit oil heading into the winter.

As energy costs are on the rise, Pimco money manager Geraldine Sundstrom, says markets are underestimating the risk of another rate hike before year-end. “Higher for longer” is likely the mantra for US rates as “inflation will remain a little bit stickier than expected,” Sundstrom said.

Another important note for agriculture is the U.S. dollar is staging a comeback, surging in value despite earlier predictions of a decline, while economic growth in China and Europe faces challenges. This reversal in the dollar’s fortunes began in July, defying expectations of a retreat that were based on the belief that the Federal Reserve’s interest rate hikes were approaching their conclusion.

The dollar’s resurgence is now reminiscent of its strong performance in 2022, a year marked by economic disruptions as it drove up commodity prices in global markets and increased the burden of foreign debts for many. Mark Nash of Jupiter Asset Management characterized the dollar’s current strength as formidable, noting that he had abandoned his pessimistic stance on the dollar earlier in the year.

Crude Oil Moves Back Above $80 with Talk of $100 by Year End: What Does That Mean for Interest Rates and Diesel Fuel Costs?

Fri, 07 Apr 2023 14:49:03 GMT

Crude oil prices have made a big push from the lows both before and after OPEC plus announced it will cut production another 1.2 million barrels per day starting May 1. Nearby futures have topped $80 a barrel but some analysts are now projecting prices to move back near $100 by the end of the year. That’s fueling talk of more interest rate hikes by the Fed.

Shawn Hackett, Hackett Financial Advisors says, " Yeah, the market is thinking if that’s a more permanent move higher that’s going to take longer for the inflation numbers to come down. Until we get a big knock down in that inflation number month over month the Fed is going to want to be safer than sorry.”

So, farmers will continue to face higher interest and fuel costs down the road. Market experts are advising farmers to get some of their diesel fuel inventory locked in ahead of spring planting.

Rich Nelson with Allendale says, “A lot of the trade still expects further higher price action. Keep in mind for crude the general story has been one of disappointment for several weeks and several months. So, I think its great to suggest higher prices and I would get spring needs, spring and early summer needs taken care of but at this point and time I’m not sure we need to panic just yet and go whole hog on getting all our needs.”

However, Nelson isn’t expecting the record diesel prices of last summer because refining capacity has improved.

Crude Oil Prices Drop Below $70: What is the Outlook for Consumers at the Pump and Farmers Heading Into Spring Planting?

Tue, 21 Mar 2023 16:09:39 GMT

Crude oil futures are trading at their lowest levels since December 2021. Last week, oil prices broke $70 and fell 10%...the worst weekly decline since April of 2020.

Oil prices are also off their highs of last year of $103.21 on May 6 and have broken over $35 per barrel. Gas and diesel prices are also sliding at the pump but will that trend continue ahead of planting? Energy experts are hoping the answer is yes.

The pullback has been as a result of the banking crisis and macroeconomic concerns that have spilled over into the equity markets. However, energy experts also say global production has increased and is now exceeding demand as Russia has been able to keep production fairly high. U.S. oil production has also rebounded post COVID. So, stocks have been building by about a million barrels per day which could continue until third or fourth quarter. That’s good news for consumers at the pump.

John Wenzel, Senior Risk Manager for StoneX Financial, Inc. says, “For right now it actually looks quite favorable. U.S. gasoline production is high and prices continue to be soft. Underneath it when you look at the dynamics for refiners it’s still quite profitable so they’re running full steam.”

Diesel fuel prices have also corrected from record highs at a national average of $4.25 last week. And Wenzel says the shortage last fall has been solved through increased refining capacity. Wenzel says, “We’ve seen in the U.S. Exxon mobile put on 250,000 barrels per day of new capacity primarily diesel in its Beaumont facility and globally there’s several other refinery projects that will come on line for quite a bit of capacity. There’s 3 million barrels per day of new oil refinery capacity globally and that’s substantial.” He says refinery capacity will exceed global demand by nearly a million barrels. So, they expect diesel fuel prices to be less volatile this spring as a result.

So, Wenzel says they expect diesel fuel prices to be less volatile as a result, which is good news for farmers and truckers and will help lower transportation costs which will also trickle down to consumers.

With the lower diesel fuel prices, farmers can get some inventory bought if they need it. However, he says there’s no rush to buy until the banking crisis gets ironed out and we see what the Fed response is.

Diesel Prices Up 78¢ from January 2022

Tue, 07 Feb 2023 14:14:11 GMT

According to the Energy Information Administration , the average U.S. price of diesel ran $4.62 a gal. in the week that ended Jan. 30, up 78¢ from a year earlier. On the East Coast, diesel sold for $4.84 on average, a 98¢ annual jump.

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Meanwhile, Europe has announced a ban on Russian diesel fuel and other refined oil products--a move that will further curb its own energy dependence on Russian energy, while attempting to limit Russia’s gains from it’s energy sector. The ban allows for a 55-day grace period for diesel loaded on tankers prior to Sunday.

The move comes shortly after G7 countries announced a price cap on refined Russian oil products, which took effect on Sunday. Fuel oil and other low-value exports will be capped $45. A cap of $60 already applies to Russian crude.

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Insurers and shippers are prohibited from dealing in items covered by the cap unless they were bought below or at the designated price.

Natural Gas Rebounds Monday after Hitting Lows Not Seen in A Year: Is the Bottom In?

Mon, 23 Jan 2023 20:43:36 GMT

Markets Now: Natural gas prices rebound Monday after hitting lows not seen in a year. Is the bottom in? John Wenzel, Senior Risk Management Consultant with StoneX has details and a look at the crude oil and diesel fuel market outlook.