Seth Meyer on biofuel blending mandates, food supply and trade flows

Biofuel production is dictated by blending mandates that vary from country to country. The Environmental Protection Agency (EPA) sets out the requirements for blending in the US. At the same time, many are concerned that soaring demand for biofuels may put pressure on food supplies.

In our interview, Seth Meyer, chief economist at the USDA, addresses production challenges, the path to sustainability and food concerns.

What are the latest developments in biofuel blending mandates for major feedstock exporting countries?

I’ll focus on the US, where right now, we’re expecting new policy announcements by the government. In fact, we’re waiting for the EPA to give us 2023 blending and a view of longer-term requirements.

In the legislation framework announced in 2007, a pathway was outlined to 2023, but there haven’t been any major updates since. This doesn’t mean that regulation ends there but that the EPA will reassess its policies.

The USDA is very much involved in discussions with the EPA in order to provide a comprehensive view of the way forward for blending mandates.

Does biofuel demand affect food supply, and how?

I think the answer is yes. There are, in fact, lots of different effects to consider at the moment – whether we’re talking about ethanol, produced from corn, which is also a source of animal feed, or distillers grains which get put back into the feed system, or biodiesel that needs vegetable oils to be produced.

So, yes, I think that there’s some impact on US markets. The solution is perhaps to be found in diversifying the feedstocks. But there’s also an understanding that there are three pillars we’re trying to address here: farm income, climate and food prices for consumers.

So, we’re trying to address all three of these issues, and while we focus on any one issue, in fact, then we neglect the other two.

However, going forward, I think biofuels will be part of the solution [to the energy crisis] and trying to add flexibility [in terms of using diverse feedstocks] will help address the issues we’ve just talked about.

How are blending mandates affecting commodities’ trade flows?

First of all, we need to make a distinction between the impact on consumer food prices in the US and the rest of the world.

In the US, we talk about only 16 cents on the dollar “before the farm gate”. But, yes, commodity price fluctuations do have an impact on food prices. If there’s demand for biofuels, there is an effect on commodity prices.

But I think there’s also an understanding that developing world consumers are much closer to commodity prices and there are concerns about transmitting these high prices to them. There’s a need to also be a reliable supplier.

What would be the most sustainable way to scale biofuel feedstock production?

We talk about a couple of different things: the first one being to add as many different things that have environmental benefits and a diversity of feedstocks so that you’re not relying on any one pathway – and so this provides a little bit of stability in terms of feedstock availability and pricing. In short, we want to have a wide variety of options and, from the US standpoint, sustainable productivity gains.

Let’s think about how to improve productivity, whether that’s productivity at the farm level or at processing, and the amount of different products you can extract from an individual crop with the effects that this could have. In fact, this would have positive effects on the climate, farm income and consumer pricing.

To what extent are inflationary concerns affecting blending mandates?

Again, we talk about 16 cents before the farm gate when it comes to a consumer’s food dollar in the US. But inflationary concerns are more directed at the developing rest of the world when we think about the current food security environment.

In more pragmatic terms, right now, approaches or responses include food aid because we want to ensure people who are most in need have access to food supply. I think there’s a need for such pragmatism to deal with the world’s current food security environment. We’re thinking about the next crop year and what flexibilities we can add for US producers and what we can address with our policies, like crop insurance to allow producers to make a wider variety of production decisions to fit their needs.

While abroad, we’re helping Ukrainian farmers, thinking about cash flow and grain storage as they face a basic problem in the ability to get their crops out. Long term, from a US perspective, we want to have sustainable productivity gains, to do more with the natural resources that we have and do so in a way that doesn’t put more stress on them and maybe even alleviates some.

So, the plan is to use technology to improve productivity and minimize environmental impacts.

For more information on the current biofuels market, take a look at our dedicated page for biofuels prices.