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The NDSU Extension weekly podcast In the Pod: Soybean Updates delivers timely insights and expert advice on soybean production.
You're listening to In The Pod, Soybean Updates, a weekly trek into the latest soybean information from NDSU Extension. With oil prices still high, it's a good idea to keep an eye on biofuel policies. Matt Gammans, NDSU assistant professor in the agribusiness and applied economics department has the latest. Matt, what are some of the new policies coming up?
Matt Gammans:So there's a few really important biofuel policies that have been in The United States or have been kind of recently put in place. So one is an old policy which is the renewable fuel standard. This is a policy that sets a target volume for renewable fuels, mostly biofuels in The United States and this is a program that's administered by the EPA, the Environmental Protection Agency. And every year they make choices and set these renewable volume obligations that fuel refiners have to meet. And so the more that they demand, the more that there's going to be a premium for biofuels. Kind of the harder it is to meet these volumes and the more that people are going to be willing to pay for biofuels to get these credits to satisfy this regulatory program. That's one program and that's one that's been in the news a lot this past couple weeks because at the March a really ambitious, I would say, kind of target volume set for renewable biodiesel, and that's gonna potentially trickle through the supply chain. So kind of refiners are going to wanna produce more biofuels made from canola and soybean oil. That's gonna increase the demand for crush, basically more soy and canola oil, and we see oil making up an increasingly high share of the crush margin. Used to be predominantly, you know, meal was the big value, now it's closer to a fifty fifty split when you look at the value coming from a soybean. And then the idea is that that could potentially then increase the price for soybeans and canola, so it kind of trickles all the way through the supply chain from a refiner back to a farmer to create this value. That's all kind of part of the renewable fuel standard, And then a new policy that was put in place in the Reflation Reduction Act a few years back but has been kind of revamped under the One Big Beautiful Bill Act this past summer is the 45 z tax credit. That's policy that's gonna create a tax credit that pays out per gallon for fuels that have kind of a lower carbon intensity score.
Bruce Sundeen:You mentioned a possible impact in the future. When might that be?
Matt Gammans:Certainly the RFS, there's kind of a long literature, a lot of kind of economic studies showing that this has kind of supported corn and soybean prices and corn and soybean basis. 45 is still early. In fact, it's so early that some of the rules for how it's going to be implemented haven't been written yet. Right? So when they write a law, they say, okay. The treasury department has to figure out all the rules for kind of how exactly we're gonna do all this accounting, and treasury department has put out some guidance, but they have not sorted through all the details yet, which is kind of a a bit crazy when you think about it because this credit is going to be able to be claimed on last year and this year's taxes. Right? Gallons that were produced and sold in 2025, gallons that are being produced right now are going to be eligible for this tax credit, but we don't yet have all the math for exactly how it's going to be calculated.
Bruce Sundeen:And there are no exceptions on when this will come up.
Matt Gammans:Well, I think that there is an expectation that it's gonna be soon. So just this past February, Treasury Department put out their most detailed documentation to date. And the kind of the one piece that I think a lot of people are interested in that didn't have kind of all the details filled out was the on farm practices. Kind of what's going to be the mechanism for a farmer to document, hey I did these practices, I you know had a cover crop or I am in a reduced till system. These are practices that, you know, the USDA's model say reduces the carbon score of this feedstock. Is there a mechanism for that to be then priced into the fuel that's created from that and then generate a premium for the refiner that hopefully a piece of that would then you know flow back to the farmer who is doing this practice.
Bruce Sundeen:Where can farmers find more information?
Matt Gammans:I would recommend looking at either some of the kind of simplified write ups. We have some out of the Center for Ag Policy and Trade Studies that I'm a part of at NDSU, you know, put out a brief explainer last summer so you'd have to, you know, scroll back to last July right when the law was passed, kind of a brief explainer on some of the changes for 45z, and then there's a lot of private companies too that are kind of looking to sign farmers up and Continuum Ag out of, you know, Iowa is just one example, but there's many, right, that are kind of getting these programs set up to try and make the paperwork side of things easier. Whenever you're gonna be getting a payment for any sort of kind of on farm practice, a big part is MRV. So that's an acronym that stands for Monitoring, Reporting, and Verification. How can basically someone know that you did what you said you did and have the documentation just like when you file taxes, right? You need firm documentation in hand. That's the same for any sort of practice that's gonna generate a premium for a tax credit.
Bruce Sundeen:Thanks, Matt. Our guest has been Matt Gammans, NDSU assistant professor in the agribusiness and applied economics department. You're listening to In The Pod, Soybean Updates, a weekly trek into the latest soybean information from NDSU Extension supported by the North Dakota Soybean Council.