Soybean farmers look to sell more product to fuel producers

WASHINGTON — Some Wisconsin farmers are saying the market for their soybeans remains unstable because of President Donald Trump’s trade war.

One sign of their anxiety: They are renting a record amount of storage space for their soybeans, hoping to wait out the current crisis, according to the president of the Wisconsin Farmers Union.

“I’m hoping that they can keep the soybeans around until next spring, when hopefully there will be a higher price for it,” said Darin Von Ruden in a recent interview.

China—once America’s largest buyer of soybeans—refused to purchase product from American farmers for months in retaliation for the president’s steep taxes on Chinese goods. Last week, the Trump administration announced a trade deal with China to purchase 12 million metric tons of American soybeans for the rest of this marketing year.

After that, a minimum of 25 metric tons will be purchased annually through 2028. The American Soybean Association said that’s the amount China has historically purchased in recent years, so the “commitments lay a strong foundation to return to those traditional volumes over the coming marketing years.”

The uncertainty has soybean farmers looking for other options, including using their crop to manufacture biofuels. A tax credit known as 45Z, which encourages production of low-emission fuels, was renewed in July, when the President signed his signature tax and spending bill into law. Soybean oil can be used to make biodiesel, which burns cleaner than traditional diesel. The renewed 45Z tax credit is still awaiting final approval from the Treasury. In a change, only fuel produced with U.S.-grown crops is eligible for the benefit.

“Fascinating way to increase soybean demand in this country,” said Tanner Johnson, a soybean farmer in Prairie Farm, Wisconsin. “Gives me a degree of optimism that we’ll be able to kind of eat our own pile of soybeans, if you will. But we just need to get some ink on paper when the government opens back up.”

Fuel producers had been using oils imported from China and Brazil, but this version of 45Z incentivizes them to buy products from U.S. producers to qualify for the rebate.

“[The] tax credit offers an opportunity for manufacturers to make a more sustainable product, better-for-the-environment product, and a product that comes from this country from American farmers. So really, that is the win, win, win that you don’t see very often in business,” Johnson said.

Alexa Combelic, the executive director of government affairs at the American Soybean Association, said creating new demand for soybeans helps to boost soybean prices.

“This is a critical opportunity that could boost demand domestically. And while it might not make up for 100% of that loss, it can be a significant portion,” Combelic said. “But until that guidance is finalized, it really doesn’t have the teeth or that full push to the market that we need to really ramp up investments in this space.”

Combelic said using soybeans for biofuel also could help with President Trump’s energy dominance agenda.

“From my perspective, biodiesel and renewable diesel can be blended into fuels that can be used in heavy- and medium-duty trucks that are on the road right now. You don’t need new technology. You don’t need electrification and developing brand new trucks… There is immense opportunity for growth in this market,” she said. “Creating a biofuel here at home that is 100% made with imports, that’s not energy security.” 

Combelic added that biofuel policy enjoys bipartisan support.

“We have members on both sides of the aisle that are supportive of biofuels because it’s a market for farmers… a boon for rural economies… [and] an opportunity to lower carbon emissions now,” she said. 

Johnson said there’s no complete replacement for the Chinese market as a destination for American-grown soybeans, but this could at least be a partial fix. 

“Biofuels in this country is a huge first step,” Johnson said. “So it’s awesome, and it helps us, selfishly, on our bottom line.”

As for the announcement last week that China will resume buying American soybeans, Johnson said he’s not lighting a celebratory cigar until he sees ink on paper and boats in ports.

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