• By  TYNE MORGAN 

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.’”

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.”

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.

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.