U.S. soybean farmers bedeviled by dried up trade flows, higher production costs and lower crop prices could use a robust market for domestic biofuel right about now, according to growers and processors dealing with a teetering farm economy.
Despite about $6 billion spent over the last few years to expand America's capacity to crush beans into soy oil -- which then can be used to make lower-emitting diesel -- the market for such fuel is sputtering. A main culprit is murky U.S. policy that's pulling the agriculture industry into a "Groundhog Day" moment.
A year ago, questions hanging over a Biden-era tax credit known as 45Z for the production of "clean" fuels vexed the market. The uncertainty helped send U.S. consumption of renewable diesel down 30% in the first half of 2025 versus the same period a year earlier.
Then, even with President Donald Trump and fellow Republicans in Congress rolling back various energy policies aimed at addressing climate change, 45Z not only survived but got changes sought by the soybean industry and was ultimately enshrined into law.
"When it comes to increasing demand for row crops, our first stop is biofuels," Deputy Agriculture Secretary Stephen Vaden told Agri-Pulse.
Still, even though the 45Z credit took force last January and several of the new provisions go into effect in 2026, the White House budget office has indicated it won't be implemented until next May.
Crop-based biofuel supporters like Republican Sen. Chuck Grassley reprimanded U.S. Treasury nominees over 45Z last month at a Finance Committee hearing, calling the May timeline "unacceptable."
Concern is mounting as soybean farmers like April Hemmes, from Grassley's home state of Iowa, say the lack of U.S. soybean purchases by China, the world's No. 1 buyer, amid Trump's tariff war is testing growers' patience as they grapple with big harvests coupled with a drop in crop prices.
April Hemmes (United Soybean Board photo)"Most of the farmers I have talked with are just worried about the conversation with the bankers they will have coming this fall," Hemmes said in an interview.
Administration officials may be poised to heed the message as Trump, who gained a second term in part due to the backing of the agriculture world, says he wants to use tariff revenue to give farmers economic relief. The Treasury Department has signaled it will provide some type of guidance before the end of December, according to two people familiar with the matter.
Treasury officials didn't respond to a request for comment.
“A number one hindrance to our industry’s growth is policy uncertainty," said Kurt Kovarik, vice president of federal affairs for the Clean Fuel Alliance America, which represents producers of biomass-based diesel and sustainable aviation fuel. "We’ve had that for a long time."
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The 45Z credit replaced a longtime flat $1-a-gallon incentive for biomass-based diesel blenders. The new incentive focused on producers was set up to give higher values to fuels with the lowest carbon-dioxide footprints.
One of the changes made in the new tax law championed by Trump is limiting the credit to fuel made with North American ingredients like U.S. soybeans. That's a major point of contention with some biofuel makers who argue the rule will narrow the marketplace for feedstocks and hurt the industry and possibly cause higher costs for consumers.
A limit on foreign biofuel feedstocks is also part of the EPA's proposed biofuel-blending rules that still must finalized.
The domestic biomass-based diesel industry, which drives about 50% of demand for soy oil produced in the U.S., is currently operating at roughly between 60%-70% of capacity, according to Kovarik. Smaller fuel producers in particular are struggling to figure out if they can even claim the 45Z credit given the only guidance out there, issued days before then President Joe Biden left office, is incomplete.
"Tax lawyers and accounting firms are having a hard time writing opinions as to whether or not someone is eligible for 45Z because they aren’t sure if the guidance has enough authority," said Tim Urban, who leads the tax policy practice of lobbying firm Bracewell in Washington.
Meanwhile, farmers are facing a perfect storm of headwinds and need certainty, said National Oilseed Processors Association President and CEO Devin Mogler.
"The China market is closed off, and they’ve got a big crop coming," he said. "And it’s dry at harvest, so it’s going quickly and the bushels are piling up."
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