Biofuels lift prospects for commodity prices, but ethanol outlook remains uncertain

Nick Paulson, an agricultural economist at the University of Illinois, told a FarmDoc webinar that he is "somewhat optimistic" about commodity prices because of demand prospects created by biofuels. His assessment centers on two contrasting policy-driven trends: a clear demand tailwind for soy-based biodiesel and renewable diesel, and uncertainty for ethanol tied to E15 policy.

Why renewable diesel and biodiesel matter now

Paulson pointed to an ongoing boom in renewable diesel and expanded soy-based biodiesel production. He described renewable diesel as "a true drop in fuel," meaning it substitutes directly for petroleum diesel and can scale demand for oilseed-based feedstocks. Federal policy updates—RFS actions, RVO announcements, and changes to SRE rules—have collectively supported that expansion. Paulson said, "I think a lot of the activity on the RFS and the RVO announcements and the SRE rules have been net positives."

Implications for soybean and crush markets

Stronger renewable diesel demand raises crush margins and domestic soybean demand because biodiesel feedstock needs more soybean oil and crush capacity. That development is already prompting capacity and production changes among crushers and may sustain upward pressure on soybean markets relative to baseline expectations.

Ethanol, E15 policy, and corn demand

The outlook for ethanol and corn is less certain. Paulson emphasized the lack of a clear policy path for nationwide, year-round E15. He warned that proposed E15 rules to date would not replicate the earlier 10% blend mandate that drove broad adoption, saying the proposed approach "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 added it will take time to lift the national blend rate closer to 15%.

Tax credits and distribution of benefits

What this means for farmers and markets

Medium run: Ethanol-driven corn demand depends on a durable, nationwide E15 policy and how quickly blend rates change. Without a strong, fast path to year-round E15 at 15%, corn-side demand recovery may be gradual.

Longer run: Tax incentives like 45Z can boost producer economics, but pass-through effects to farmers are uncertain.

Policy shifts are improving demand prospects for soy-based biodiesel and renewable diesel, strengthening price fundamentals in oilseed-related markets. Ethanol and corn remain exposed to policy uncertainty around E15, and the distribution of tax-credit benefits to growers is still unclear.