Bumper crops underscore risk in biofuel investment slowdown

America’s crop farmers got hit with a fresh wave of market woes this week, ramping up pressure on the Trump administration and Congress to move faster on biofuel policy the industry says is crucial to its future. 

Domestic supplies of corn and soybeans are bigger than previously estimated, with the current corn crop at a record, the the Department of Agriculture said in its closely watched monthly crop report on Monday. Grain and soy prices fell. 

The full bins collide with murky demand outlook and a surge in farm production costs. Ag and biofuel groups are doubling down on calls for Washington to take action. The wish list includes passing congressional legislation to allow year-round, nationwide sales of higher blends of corn-based ethanol, known as E15, and for the Environmental Protection Agency to finalize overdue 2026 biofuel-blending regulations.

The administration took power last January “very supportive of the biofuel program," said Arlan Suderman, chief commodities economist for StoneX Group. "But then that momentum got lost in the bogged down process of writing policy." 

The National Corn Growers Association warns that surplus supply will keep corn prices low amid higher input costs.

Jed Bower (NCGA photo)

“We need long-term market solutions, and we need them quickly, or this is going to deepen the economic crisis in the countryside,” Ohio farmer and NCGA President Jed Bower said following release of the USDA’s World Agricultural Supply and Demand Estimates report. “The urgency for Congress and the president to open new markets abroad and expand consumer access to ethanol just increased exponentially.”

Renewable Fuels Association Chief Executive Officer Geoff Cooper said pollution-related concerns about summertime ethanol sales are outdated by decades and that marketplace restrictions "are literally choking off demand and shortchanging America’s farmers.”

The administration has already set aside $12 billion to help farmers hurt by higher costs, lower crop prices and soft demand. House Agriculture Committee Chairman Glenn “GT” Thompson, R-Pa., said last month that at least $10 billion more in federal aid will be needed.

Green jet fuel stalled 

Another bearish note in this week’s WASDE was a pullback in the estimate for U.S. sales of soybeans to other countries. USDA said the trim was due to higher Brazilian production and exports, amplifying broader concern about the future of American competitiveness. Many analysts said the agency didn't cut enough.

Just a few years ago, a flurry of announced plans to make more sustainable aviation fuel in the U.S. boosted investment in the fuel and triggered talk of massive amounts of new crop acreage. That came amid a boom in renewable diesel production. Both fuels can be made with a wide array of raw materials, including corn-based ethanol and soybean oil. 

More recently, biomass-based diesel output stumbled due to policy uncertainty, including EPA's pending biofuel-blending rules and the Treasury Department's guidance on the new 45Z clean fuel production tax credit. SAF production has still risen, though it is running far short of current capacity. 

The slowdown in investor interest, at least for now, is yet another headache for U.S. farmers, especially soybean growers struggling after China stopped buying their crops for a big chunk of last year due to President Donald Trump's tariff wars. 

Montana Renewables CEO Bruce Fleming says the lack of policy clarity means there's not funding for new U.S. biofuel projects. 

“Investors can’t make any money available because of uncertainty, which means we are going to run into a supply shortage probably sooner than people think, particularly in SAF,” he says.

Meanwhile, Montana Renewables, which makes both renewable diesel and SAF, has plans to sell as many as 150 million gallons of SAF a year, up substantially from current capacity, according to Fleming. The company is one of three leading green jet fuel producers in the U.S.

 The lower-emitting fuel was a top priority of the Biden administration, though has drawn scant attention from Trump. The president's disdain for climate change-related policy also has caused some companies to ease off sustainability plans. 

Gene Gebolys (World Energy photo)

After World Energy temporarily halted SAF production last year due to its operating partner, Air Products, cutting its partnership with the company, founder and CEO Gene Gebolys told Fastmarkets that the Trump administration’s stance on environmentally friendly energy was partly to blame.

Unlike biomass-based diesel, SAF is especially vulnerable to such perceptions because it’s a market still in its infancy. Since aviation isn’t easily electrified, growth of SAF is seen as critical for U.S. ethanol and corn, the biggest U.S. crop.

More than a third of America’s corn harvest each year goes to making the gasoline additive. Ethanol, facing an existential crisis with the rise of electric vehicles, is among pathways to make SAF.  

In November, LanzaJet Inc. said it started commercial operations at its demonstration-sized SAF plant in Georgia after a string of delays, marking the world’s first production of jet fuel using ethanol. Still, a slew of plans to build full-size ethanol-to-jet plants by various companies have yet to materialize.  

Soy-heavy green diesel is also viewed as crucial for U.S. agriculture, but it’s further along as an industry. The fuel used to power trucks and other heavy machinery is currently favored by many fuel producers over SAF, after federal lawmakers last summer cut the base value of the 45Z credit for SAF from $1.75 to $1 a gallon. That put it at the same level as green diesel, which is less costly to make.

There's bipartisan legislation in Congress to restore the value of the credit. 

In a November report, BloombergNEF analyst Jade Patterson said U.S. SAF capacity could increase to 760 million gallons by the end of 2027, up from roughly 400 million now, as more capacity comes online. But demand at the moment is in question, in part due to the reduction in 45Z. 

Overall, StoneX's Suderman said the policy question is coming at a big cost. 

“We’re losing business due to the loss of momentum.”