How shifting fuel demands are affecting crop production

April 11, 2023
More consumers are expected to transition to electric vehicles in the coming years. Nelson Neale, head of CHS global research, explains what that means for farmers and highlights new market opportunities.

More electric vehicle charging stations are popping up across the country as people transition from gasoline-powered engines to electric vehicles. Nelson Neale, head of CHS global research, says farmers should expect a gradual decline in ethanol demand in the coming years as that trend continues. At the same time, the drive for green energy products is opening other ag market opportunities.

Electric vehicles could impact corn production

Neale says the evolution could reduce the need for corn to produce ethanol. Today, he explains, nearly 40% of the U.S. corn crop is used for ethanol and related co-products, according to the USDA. But, despite some media reports, he says the transition to electric vehicles (EVs) won’t have an immediate and dramatic impact on agriculture.

“Estimates suggest that by 2030, 30% of all new vehicle sales will be EVs. That’s nearly 5 million vehicles, but to put that in perspective, the U.S. vehicle population is around 300 million. Based on these estimates, EVs could displace between 2 million and 2.5 million corn acres by 2030. That’s certainly a large amount, but not so large that it will significantly impact agriculture,” says Neale. “The electric vehicle surge is coming, but it will be gradual and the agriculture industry will adjust year by year as that transition affects more corn acres.”

New opportunities emerge in renewable fuel production

While ethanol use may decline in the coming years, Neale says increasing demand for renewable diesel could add market opportunities for soybean growers.

“It’s unusual to have a new demand source show up in commodity markets. In agriculture, we’ve seen this happen twice. The first was the advent of ethanol as a blending component of gasoline in the mid-2000s. Today another new demand source is upon us. This time it is soybeans for renewable diesel,” says Neale.

Neale says the transition to renewable diesel could help decarbonize the fuel supply chain.

“Renewable diesel can be derived from animal fats, used cooking oil and feedstocks like soybean and canola oil. The only feedstocks with the size, scale and rail transport capabilities for large-volume renewable diesel production are soybean oil or perhaps canola oil,” says Neale. “The renewable diesel phenomenon will have a tremendous impact on agriculture and soybean acres as we look ahead five to 10 years and is something for farmers to keep in mind as they plan for the future.”

This article is part of a six-part series on the trends shaping the future of agriculture by Nelson Neale, head of CHS global research. Read the full series here:

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