Farmers, crushers look for continued growth through strong biofuel policy

Oilseed processing plants are running wide open now and more processing facilities are in the works, creating improved economic opportunities for farmers and rural communities. Whether that momentum will be maintained depends in large part on decisions made in Washington, D.C. and in state capitols across the country, according to Devin Mogler, president and CEO of the National Oilseed Processing Association.

The focus on biofuel policy “definitely keeps us up at night,” Mogler said in a recent Open Mic podcast. “It’s driven in large part by federal biofuels policy as well as state biofuels policy. Getting that part right helps the demand for the oil and keeps it from getting that byproduct that it used to be decades ago.”

On the other hand, Mogler said, “The demand for meal, for protein is real” and that’s also driving demand.

“Globally, people are eating more and more protein, and one of the primary feed ingredients for livestock, not only here in the U.S. but globally, is protein. There’s also a consumer protein craze where people are looking to see protein added to their potato chips, to their coffee, to their popcorn, and a lot of that is coming from soy protein isolates,” Mogler added.

“But certainly, the operating environment that makes sense for us to continue to expand domestic soybean crushing it starts with federal biofuels policy and the RFS (Renewable Fuel Standard).

Mogler said when those volumes are set too low, it slows the investment in this industry.

“When they’re set at a high level, like they were recently, we’re looking for growth going forward,” he said. “That’s the kind of signal that justifies continued investment. And we just need to make sure we can tell our story in D.C. of all the positive impacts that it has on the rural community, to our energy security, for consumer affordability, for extending our fuel supply.”

Twenty some years ago when the RFS was first passed in 2005, and then expanded in 2007, it was designed to reduce the reliance on foreign oil supplies.

Now Mogler said about 10% of the distillate supply is renewable diesel and biodiesel.

“That’s a massive success story that would have been zero 20 years ago. So, we’re on the right path, and I think sound government policy will continue to move that higher.”

While export markets are still important, a strong biofuel policy also helps generate more economic activity here in the United States.

Mogler said processing is around 63% of the soybean crop grown in the U.S. this year—a dramatic shift from what it was at just five or six years ago when the country was relying on export markets for more than 60% of whole soybeans.

“It’s really a paradigm shift. We’re crushing the soybeans here, we’re adding the value here, we’re using the oil here as well as the meal,” he said. “It’s really just deleveraging us from being reliant on export markets for those whole soybeans.”

Applauding SREs

The White House recently finished a review of the Environmental Protection Agency’s plan to safeguard crop-based fuels from bigger-than-expected small refinery exemptions from biofuel-blending rules.

After concern the exemptions would weaken strong blending requirements, the agency said it would reallocate 100% of the difference between projected and actual exempted volumes for 2025 SREs into the biofuel rules for this year and next year.

On Oct 13, EPA Administrator Lee Zeldin delivered on that commitment during a swing through Iowa. 

“The Trump administration is carrying through on its promise to support Iowa family farmers and biofuel producers,” said Sen. Chuck Grassley, R-Iowa. “I worked closely with the White House, along with Sen. Ernst and Reps. Hinson, Miller-Meeks, Nunn and Feenstra, to secure full reallocation for all exempted biofuels, and I appreciate the Trump administration following through in a timely fashion. Today’s decision is a major boost for Iowa’s rural economy and the 31,000 Iowa jobs that biofuels directly employ.”

Without the move, demand for soy-heavy biomass-based diesel would decline by 500 million gallons, and soybean farmers would see almost a $1 billion loss in revenue, the American Soybean Association warned.

U.S. oilseed expansion ahead

As NOPA members like Scoular, CHS and Louis Dreyfus collectively invest more than $7 billion to ramp up U.S. oilseed processing in anticipation of more feedstock demand for making biomass-based diesel and similar fuels, alternative oils from crops like canola, sunflower and camelina are garnering more attention, Mogler said.
 
Soybeans now account for about 97% of oilseed processing, but other crops with higher oil content — some of which have already started to expand — are expected to make up an increasing amount of the crush in coming years, the NOPA CEO says.
 
“It’s not going to happen overnight, but I think there’s a lot of potential for some of these other crops,” Mogler said.

Scoular, a more than century-old agribusiness based in Omaha, Nebraska, recently opened a crush plant in Kansas that can process both soybeans and canola. The facility is running at capacity, said Ed Prosser, senior vice president of special projects at Scoular.

“We had about 100,000 acres of canola this year, give or take,” Prosser explained, adding that strong RVOs have created margin for both oilseed crushers and farmers. 

“We’re selling meal to the local dairies and feed yards, and oil to our renewable fuel customers in California and Wyoming.”

Editor’s note: Sara Wyant is publisher of Agri-Pulse Communications Inc., www.Agri-Pulse.com.