Soybean growers hear reports on NAFTA negotiations and the biodiesel tax credit

Soybean growers heard updates on domestic and export markets that are vital to the success of the soybean industry during the Kansas Soybean Expo in Topeka Jan. 10.

Domestically produced biodiesel has grown into a very important market for soybean growers. Donnell Rehagen, CEO of the National Biodiesel Board, said biodiesel production has grown from 100 million gallons in 2004 to in 2.5 billion gallons in 2017.

Three issues facing the biodiesel industry are imports, the Renewable Fuels Standard and tax credits.

“A couple of years ago we started to see a lot more pressure from biodiesel being imported into the United States, particularly from Argentina,” Rehagen said. “Those imports were growing at over 100 percent per year.”

Argentina depends heavily on export taxes for government revenue. This provided incentives for the production and export of biodiesel. Argentina was producing three times more than their domestic markets could absorb.

“The U.S. became their market for exports,” Rehagen said.

Biodiesel subsidized by Argentina was coming into the U.S. and was being sold below the cost of production. This put a lot of pressure on domestic production.

In 2017 the United States filed two international trade cases through the Department of Commerce against Argentina. Rehagen expects a final resolution of these cases in the next few months.

The second issue is retention and expansion of the Renewable Fuels Standard. This is the number one driver of the U.S. biodiesel industry.

“It was designed to provide some energy security for the nation by increasing domestic production of renewable fuels,” Rehagen said.

During the Obama administration the Biodiesel board saw some positive movement in the area of increasing RFS volumes.

“Our goal is to continue to increase the volumes of biodiesel in the RFS,” Rehagen said.

The challenge recently has been to explain the value of RFS to a new Environmental Protection Agency administrator in the Trump administration. The original proposal by the Trump administration was to reduce the volume required by the RFS.

Talks between the new EPA administrator and the biodiesel industry are ongoing with the goal of achieving a net increase in biodiesel volumes in the RFS. However, volumes in 2018 will be the same as they were in 2017.

The biodiesel tax credit is the third issue. This tax credit was passed in the fall of 2004 and signed into law in 2005.

“The biodiesel tax credit changed the economics and the dynamics of biodiesel production,” Rehagen said. “It created fast paced investment in the biodiesel industry.”

This tax credit expired in 2016. The goal is to get this credit renewed and extended for the long term.

Many U.S. soybeans are exported in the form of poultry and eggs. Jennifer Ott with the USA Poultry and Egg Export Council said 138 million bushels of soybeans are exported as poultry. The top market for the U.S. poultry industry is Mexico, which is the largest market for U.S. exports of chickens, eggs and turkeys.

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“Soybean prices would decline 60 percent without poultry and egg production,” Ott said.

The North American Free Trade Agreement is key to success to U.S. to Mexico. President Donald Trump campaigned long and hard about doing away with NAFTA. Kevin Roepke with the U.S. Soybean Export Council said Trump has softened his stance on NAFTA since taking office.

“NAFTA does have some hangups and can be improved, however,” Roepke said.

Some of the items that need to be renegotiated are sections of the agreement dealing with seasonal produce, auto manufacturing and long haul trucking.

“We are optimistic about the outcomes of these NAFTA talks,” Roepke said. “We see them as an opportunity to increase our relationship with Mexico and Canada.”

Doug Rich can be reached at 785-749-5304 or [email protected].