Biofuels best hope for ag markets: Hultman

PEORIA, Ill. — The U.S. export share of world trade has declined over the years due to increased global competition, making the expansion of biofuels all the more important.

Over the past 30 years, world soybean demand is up 190% and corn demand increased by 123%, while wheat demand is 46% higher, barely keeping pace with world population growth.

“Just a couple decades ago, the U.S. supplied 50% to 60% of the world’s corn and soybeans. Now we’re down to 29% on soybeans and 27% on corn. We used to supply 25% or 30% of the world’s wheat, and now we’re down under 10% of the world’s wheat,” said Todd Hultman, DTN lead analyst.

“With Brazil increasing production the way they are, and with their intent to keep increasing that cropland base for corn and soybeans, we’re facing a very tough situation. We’ve already seen the bearish effect of Brazil’s expansion.

“So, every year that passes we’re losing export share, especially in the case of corn and soybeans, and it’s primarily due to Brazil’s expansion. In the case of wheat, it’s due to Russia’s expansion.

“How do we counter that? What can we do? This is where it comes down to biofuels. I think this is our best hope for preserving our ag markets for the future.”

Profit Impact

In comparing the U.S. Department of Agriculture’s season-average farm price, production costs were below corn prices 13 of the past 34 years.

“It’s also true that in the 13 profitable years, 10 of those years happened since ethanol became part of the market in 2007. That’s how important ethanol has been to the profitability of the corn market for the U.S. producer,” said Hultman at the Greater Peoria Farm Show.

Soybeans have been consistently more profitable than corn due to the strong growth in global demand.

Soybeans have been profitable in 21 of the past 34 years, and 13 of those years also happened since ethanol began.

“Even though you don’t use soybeans to make ethanol, the soybean planting decisions have been affected when corn is more profitable and it entices corn acres away from soybeans. So, it’s been a benefit to the profitability of both markets,” Hultman said.

Best Alternative

The ethanol market is largely limited to a 10% share of the gasoline demand pie.

“Anything that can be done to expand biofuels is what we really need for the future of U.S. agriculture to have a sustainable market in a world in which we’re constantly losing market share of exports,” Hultman said.

“I would suggest that expanding the use of biofuels is not just good for diversifying our energy base, which is the reason we had ethanol in the first place. President George W. Bush wanted to diversify the energy base, but in this day and age of going green, our biofuels happen to be the best low-carbon alternatives out there.

“Windmills are great. Solar is great. Hydropower is great. I’m for it all, but we don’t have enough to accommodate the growth of our country. We also still need oil and gas production.

“It’s the right moment, the right day in this time to expand the use of biofuels to help get us from a high-carbon fuel to a low-carbon fuel and it does it in a way that protects our farmers and the future of U.S. agriculture.”

As export competition continues to ramp up, farm conditions could be challenging without biofuels.

“Even if Brazil stays at a normal pace of expansion, it’s going to get tougher every year to compete with that. Biofuels is one of the best, maybe the only market area that I can see that’s worked out,” Hultman said.

“Renewable diesel is being very well accepted in California. Earlier this year, they found that 57% of diesel fuel on the road in the trucks in California is biomass-based diesel. So, that market is being accepted very well and it would be interesting if some other states may consider doing that.

“Sustainable aviation fuel is one that the ethanol guys are very excited. They’re tired of fighting the oil industry.

“We recently had another adverse court ruling where they’re trying to grant more exemptions to the oil refiners that they don’t have to meet the blending requirements. That continues to be a real pain for advancing the use of ethanol.

“Ethanol has proved itself to be a great fuel and when the gas price gets high, you can see how that ethanol price helps you at the pump.”