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Biofuels driving optimism for commodity prices

An ag economist at the University of Illinois says he’s somewhat optimistic about the direction of commodity prices primarily due to demand prospects created by biofuels.

In a recent FarmDoc webinar, Nick Paulson says updated federal policies are driving soy-based biodiesel and renewable diesel production.

“We’ve seen the boom in renewable diesel, which is a true drop in fuel, and so I think there’s even more opportunities to expand renewable diesel use.”  He says, “I think a lot of the activity on the RFS and the RVO announcements and the SRE rules have been net positives.”

However, he says the lack of clear policy on nationwide, year-round E15 makes the outlook for ethanol, and thus corn demand, a little cloudier.

“The proposed E15 rules we’ve seen, it would still be something that wouldn’t be anything like the mandate that we had that brought in the 10% blends that we have now.”  He says, “And so, it would still take time, I think, to get that national blend rate up closer to that 15% level.”

Paulson says continued movement on the 45Z tax credits is likely to improve the outlook for ethanol producers, but it’s unknown how much of those benefits will make their way to farmers.