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Major agricultural commodity traders, including Cargill and Bunge Global, are slowing soybean purchases because of uncertainty surrounding US biofuel policy.
Unclear guidance on a new clean fuel tax credit has prompted some biofuel producers to delay soybean oil purchases for next year.
This is reducing demand for soybeans and has led major crop trading companies to scale back purchases as well.
Soybean oil is one of the key feedstocks used to produce several types of renewable fuel, including renewable diesel and sustainable aviation fuel.
By mid-October, most fuel sellers had secured only about 10% of their biodiesel fuel needs for the next first quarter, according to David Fialkov, executive vice president of government affairs at NATSO, a trade group for truck stops and travel centers.
That compares with more than 80% at the same point over the past decade.
Fialkov said: “Nobody is producing, nobody is buying, nobody is blending.”
Cargill said uncertainty around 2025 biofuel policy had not affected its soybean purchasing pace and that it continues to buy soybeans across its operational assets. Bunge declined to comment.
The industry is waiting for the Treasury Department to issue guidance on the clean fuel production credit scheduled to begin in January.
One complex issue dividing the industry is whether the tax incentive, known as 45Z, will be available for low-carbon fuels made from imported biofuel feedstocks, such as used animal fats and used cooking oil, which compete with soybeans and other US crops.
There is also significant uncertainty around the tax credit because of political transition questions in the United States.
It remains unclear whether the current administration will issue proposed guidance before a new leadership team takes office.
Another key question is whether the 45Z credit will be extended beyond its current expiration at the end of 2027.
The delay in guidance leaves renewable fuel producers without clarity on the financial viability of production, threatening to slow the fast-growing industry.
Just two years ago, the United States was rapidly building more plants to process crops such as soybeans, which are crushed to produce oil for food and fuel as well as meal for livestock feed.
Susan Stroud, grain analyst at No Bull Inc., said producers are not eager to book large volumes of soybean oil until guidance is issued.
With uncertainty over when and how the new subsidy will be implemented, crushers have shifted a larger share of soybean supplies into food export markets, according to Kent Woods, chief executive of CrushTraders.
Woods said: “There is less demand for renewable diesel, and food demand is driving the market right now.”
This dynamic has also caused a major shift, with the United States exporting soybean oil again.
Source: BNN Bloomberg