Biofuels Among the Greatest U.S. Agricultural Trade

Sustainable aviation fuels and other biofuels represent one of the greatest U.S. agricultural trade opportunities, a senior Office of the U.S. Trade Representative official said on Thursday, stressing that the U.S. is working with partners to open new markets for producers.

Responding to a question during a Q&A at the Biotechnology Innovation Organization’s bio agriculture and environment summit on what he thought was the “greatest trade opportunity for the U.S. agricultural value chain,” Chief Agricultural Negotiator Doug McKalip argued that “the prospect for aviation fuel, and fuel in general, is just tremendous.”

“I think the opportunities in fuel present really unbelievable opportunities in terms of just sheer volume and dollars,” he added.

Global biofuel demand is set to surge by 38 billion liters between 2023 and 2028, almost a 30 percent jump from the previous five-year period, as countries push to cut transportation emissions, according to International Energy Agency data. Emerging economies like Brazil, Indonesia and India are expected to drive the bulk of the growth in demand, as biofuels are a more cost-effective decarbonization option than electrified transportation in those countries, the IEA says.

“You look at how much is consumed and where it comes from now and what could be possible using feedstock — I’m not just talking about soybeans but corn and a whole lot of things,” McKalip said, adding that even agricultural byproducts like distillers grains could hold trade opportunities as biofuel feedstocks.

Feedstocks from waste and residue products could face particularly acute supply constraints in the coming years. Climate programs in Europe and the U.S. are designed to incentivize the use of the lowest-carbon feedstocks. Demand for vegetable oils, waste and residue oils and fats — including used cooking oil — is expected to grow by 56 percent between 2022-2027 as waste and residue-based biofuels grow from 9 percent of global biofuel production in 2021 to 13 percent in 2027, according to the IEA.

Last month a group of mostly Republican House members urged the administration to prioritize opening new markets for U.S. biofuel producers. Of particular concern to the lawmakers, led by Ways & Means trade subcommittee member Darin LaHood (R-IL) and Rep. Randy Feenstra (R-IA), was Brazil’s reinstated tariff on ethanol from the U.S., which is expected to rise to 18 percent in 2024. The signatories also cited India’s import ban on fuel-grade ethanol and a cap on the use of crop-based biofuels in the United Kingdom among their grievances.

McKalip said USTR had been working closely with Brazil on the issue.

“We have been engaged in earnest with the Brazilian government, especially over the course of the last couple of months working with not only their agriculture ministry, but their trade ministry and, frankly, the ministry of minerals as well,” McKalip told reporters on Thursday, referring to the Ministry of Mines and Energy.

McKalip argued that the issues for U.S. biofuel producers in Brazil’s market extend beyond the tariff. U.S. companies, he said, are not accepted under their renewable fuel standard program, which mandates an ethanol blending requirement of 27 percent and a 12 percent biodiesel blend, according to the IEA.

“We’ve been pushing for regulatory changes to allow our companies to successfully register,” McKalip said.

USTR Katherine Tai told lawmakers in hearings this week that she had also been working on the issue. In response to a question on Brazil’s ethanol tariffs from Senate Finance Committee member Chuck Grassley (R-IA), Tai said she had raised the issue with her Brazilian counterpart “about a month and a half ago” and that USTR was “actively working on it.”

McKalip said he also plans to discuss barriers for U.S. biofuel producers with officials when he visits India next week.

India’s Directorate General of Foreign Trade in 2018 banned biofuel imports for transportation uses to spur domestic production, but the country has continued to allow imports of industrial grade biofuels. India, however, may struggle to meet its 2025 blending targets without relaxing import restrictions, according to the U.S. Agriculture Department.

McKalip next week will be in New Delhi as part of a USDA trade mission organized by Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs Alexis Taylor, he told reporters.

“We’re going to have government-to-government discussions and we certainly will be bringing up the issue,” McKalip said.

The UK limits the share of transport fuel that can be produced from crop-based biofuels, beginning at two percent in 2018 and gradually tightening to two percent in 2032, according to the UK Department of Transportation.

U.S. biofuel producers have argued that the administration should push back on the UK’s progressively lower crop cap to reduce industry trade barriers.

Originally shared by Bloomberg via, April 19, 2024.

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