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March 24, 2023
Big Oil
is Teaming Up With Big Ag, And it Could Turn Cover Crops Into the New
Cash Crop for Farmers
U.S. Farm Report FJR: Fueling the Crush with Cover Crops
Renewable diesel is revving up interest from both agriculture and the
oil industry, and now oil and agriculture companies are teaming up to
find additional crop sources to fuel the growing demand. Cover crops
could be an additional source, which would also give farmers another
revenue stream.
“There seems to be no holding back this
investment in renewable diesel and sustainable aviation fuel,” says
Peter Meyer, grain and oilseeds economist with S&P
Global Commodity Insights.
Meyer has also been watching the renewable fuels growth potential
closely for the past two years.
“We had a conversation with a major oil company this week, and they
asked me why my soybean oil demand for renewable diesel was flat from
2024 to 2025,” says Meyer. “And I said, ‘because you run out of crop,
and you run out of crush capacity.’”
![](images/images_03_28_2023/Screen%20Shot%202023-03-24%20at%208.16.30%20AM.png)
S&P Global Commodity Insights forecasts the demand for soybean oil to
increase 25% from now until 2024, with that forecast to stay flat into
2025. That’s because S&P is forecasting crush capacity to grow by 25%
during that same time frame.
First Renewable
Fuels Plant Now Coming Online in California
The awaited increase in demand has been talked about for a couple
years, and the first major U.S. plant to produce renewable diesel, is
set to come online yet this month. “There's an enormous plant out in
Martinez, Calif., which is a Marathon plan that is going to be running
in the first quarter and then running full bore by the fourth
quarter,” says Meyer.
In 2021, Marathon
announced plans to convert its Martinez, Calif. refinery facility to
a renewable fuels facility. And as the first of more than 20
announcements since, it's the one the entire industry is watching, as
it marks the start of a new era for renewable fuels. The partnership
for this plant is with Neste, an oil refining and marketing company,
produces, refines and markets oil products.
“That's a joint venture between Marathon and Neste,” says Meyer.
“We're tracking cooking oil imports into the U.S. very closely. They
have increased quite a bit that would be the preferred feedstock for
that plant. Whether or not they have enough, that's the question.”
![](images/images_03_28_2023/Screen%20Shot%202023-03-24%20at%208.16.17%20AM.png)
As more crush facilities come online, the California plant will
produce renewable diesel from mainly used cooking oil for now.
“China is the world's largest exporter of used cooking oil. TheUnited
States used cooking oil was basically exported into Singapore
converted into renewable diesel and brought back into California. Now
with the Martinez, Calif., plant coming online we think to use cooking
oil stays in the U.S. will grow, and also the us becomes a net
importer,” explains Meyer.
![](images/images_03_28_2023/Screen%20Shot%202023-03-24%20at%208.16.09%20AM.png)
Turning Other
Cover Crops Into Cash Crops for Farmers
S&P Global Commodity Insights shows soybean oil is still be the main
source for other renewable diesel plants coming online, but with not
enough soybean acres to meet that demand, companies are looking at
other crops, as well.
From camelina and canola to pennycress, agricultural companies are
teaming up with oil companies to find additional sources to make
renewable diesel.
Last week, Corteva,
Bunge and Chevron announced a commercial collaboration to
introduce a proprietary winter canola hybrid to produce plant-based
oil with a lower carbon profile. The goal? Increase availability of
vegetable oil to fuel the domestic renewable fuels market.
“This week's announcement with Corteva really
shows that Chevron and Bunge are
in it to win it,” says Meyer. “It also shows despite the fact that
we're going to have additional soybean crush capacity coming online
here in two years, they don't want to rely on that.”
Corteva’s announcement comes on the heels of a
joint venture between Shell
Oil and S&W Seeds to grow camelina.
“It's called Vision Biofuels,” says Brent Johnson, vice president of
sales and marketing for Americas with S&W Seeds. “And it's owned by
both Shell and S&W Seeds. So, we formed a separate joint venture.
They're going to be doing breeding and research, and actually, it’s at
one of our former facilities in Nampa, Idaho.”
Johnson says the goal is to give growers another possible seed source,
and one that doesn’t take away from their crop rotation today.
“I think a key point to the camelina is we're not going to replace any
of our food production acres, it’s an additive,” he says.
While the main idea is to use it as a cover crop, it could also be
planted as a double crop in early spring.
“It's a very short season crop, just 90 days to harvest,” says
Johnson.
CoverCress Could
Grow to 20 Million Acres
Another crop creating opportunity is field
pennycress, a crop developed by CoverCress through
breeding and gene editing. Pennycress is a common winter weed, but the
startup company that began in 2013, turned it into a cover crop that
can be crushed, with the oil turning into another source for renewable
fuels.
In 2022, CoverCress raised
$26 million and partnered with Bunge and Chevron. Then, later that
year, Bayer acquired the majority share of CoverCress.
"They planted 10,000 acres of pennycress this year, they're looking
for 20 million acres, yes 20 million, is their target within the next
five years,” says Meyer.
True Test for
Renewable Diesel
Meyer says the trust test to which investments will gain ground could
come later this year.
“2023 is going to be the year where we find out who the contenders are
and who the pretenders are,” says Meyer.
As more joint ventures are announced, it’s opening the door for a new
era of opportunity, as well as unique partnerships. Traditionally, oil
companies were at odds with agriculture, especially when it came to
ethanol. But renewable diesel is the new common ground for oil and
agriculture.
“Who would have ever thought that oil companies would have been in the
seed business? This is big oil joins, big ag,” Meyer says.
The new partnerships are ones S&P Global commodity Insights sees as a
tremendous opportunity for farmers to see a second cash crop. And it’s
not just one crop -- but a multitude of crops that farmers could cash
in on in the years ahead.
“This is the opportunity, not necessarily for you to have to change
your change your rotation or whatever. But the fact of the matter is,
this is an opportunity for you to make more money on your land, if you
pay attention to what's going on around you,” says Meyer.
Green Play Ammonia™, Yielder® NFuel Energy.
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