As the Trump administration mulls over making changes to the US ethanol mandate and China proposes tariffs on US agricultural imports, US farmers are growing increasingly anxious. Two key field crops may be significantly impacted by the decisions.
Corn is the leading feed grain crop grown in the US. Planted acreage for this crop rose less than 1.0% per year on average between 2007 and 2017. Gains were largely driven by increases in US production of bioethanol, for which corn is the primary feedstock. By 2017, this application accounted for 38% of domestic consumption by volume.
The Energy Policy Act of 2005 created the Renewable Fuel Standard, which sets standards for the supplementation of petroleum-based fuel with biofuel. The subsequent Energy Independence and Security Act of 2007 expanded these mandates, setting a goal of 24.0 billion gallons of renewable fuel in 2017 and 36.0 billion gallons in 2022. The Environmental Protection Agency, which sets yearly targets for biomass-based diesel, has mandated 2.1 billion gallons of this material by 2018, an increase from 1.63 billion gallons in 2014.
With the current administration considering changes to the Renewable Fuel Standard, that 38% share of corn demand for bioethanol production is at risk of a significant decline.
In the US, soybean ranked second to corn in terms of planted acreage in 2017 and is the predominant oilseed, accounting for some 90% of annual production. While the bean itself is edible, its derivatives – soybean meal and soybean oil – are used in many different applications, including food for humans and animals, biodiesel, and industrial chemicals.
In 2017, 31% of domestically produced soybean oil and soybean meal was exported. According to the USDA’s Oilseed Outlook, of the 43.6 million tons of US soybean export commitments, 26.2 million tons are committed to China – more than 60%. As talks of an all-out trade war between the US and China continue, China has proposed a 25% tariff on imports of US soybeans.
While corn growers face the threat of ending the growing season with a glut of corn and little demand for it, soybean producers may find success with other foreign markets. China’s strong appetite for soybeans compounded with the price increase brought on by a 25% tariff will push Chinese buyers to other exporters such as those in South America. As the South American supply is exhausted due to an influx of demand and prices are driven up, European buyers will be drawn to the US supply.
For more insights into the US field crop seed industry, see Field Crop Seeds: United States, a report published by the Freedonia Focus Reports division of The Freedonia Group. This report forecasts to 2022 US field crop seeds planted in metric tons. Total volume is segmented by seed type in terms of:
- other field crop seeds such as barley, oats, and sunflower
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About the Author
Chris Dyer is a Market Research Analyst for Freedonia Focus Reports. He holds a Master of Arts in Security Studies, and his experience as an analyst covers multiple industries.