Rabobank highlights ‘global’ SAF upside for Australia’s agriculture sector

Learn more about how SAF can generate more demand for agricultural products and economic benefits for farmers in the short-term

The increased use of sustainable aviation fuel (SAF) around the world could provide an opportunity for Australia’s agriculture sector, regardless of whether the country adopts and expands its use of biofuels, Netherlands-based bank Rabobank says in a report published on Tuesday, May 28.

Australia is one of the world’s biggest exporters of agricultural products – particularly wheat, barley and rapeseed – but is also a major producer of sugar and used cooking oil – all potential feedstocks for SAF production.

Structural change in agriculture demand for biofuels

But increasing pressure on the aviation sector to find ways to decarbonize has driven governments in the US, the EU, the UK and China to consider introducing incentives to encourage the wider use and adoption of SAF globally.

Some targets are so ambitious that they are likely to drive a broader change in global trade flows, with the US targeting 35 billion gallons of SAF production by 2050 – more than twice the existing ethanol mandate – and the EU calling for 70% of all jet fuel to be sustainable by 2050.

“This could ultimately lead to a structural change in demand for Australian agricultural products similar to that previously created by the growth of the automotive biofuels industry in Europe and the US,” the report’s author, Stefan Vogel of RaboResearch said.

While supplying grain and oilseed feedstocks directly into SAF production would be the most likely way for the agriculture sector to benefit from the increased use of SAF, the report says that much of the debate around SAF is starting to focus on sustainable farming credentials.

“The lower the carbon footprint these agricultural feedstocks have, the higher the price premium they are likely to be able to command,” Vogel said, with any incentives likely to hasten the drive to lower-carbon farming practices, with farmers bidding to lock in higher prices for the key feedstocks.

Globally, SAF production capacity is likely to have reached 17 million tonnes within two years, rising to 25 million tonnes by 2030, the report says.

“Three quarters of the announced global production capacity [is] expected to use a technology that requires fats such as vegetable oils, animal fat or used cooking oil,” Vogel said, while up to 10% of production is likely to use ethanol.

How is SAF supply meeting demand and what incentives are in place to boost production and adoption? Access our data analysis on US SAF production patterns and credit pricing trends.

The rise of alcohol-to-jet fuels technology and efuels

There are a number of approved pathways to producing SAF, with the most common form currently using a process of hydrotreated esters and fatty acids (HEFA) that requires vegetable oil or waste-based oils.

More recently, however, excitement around alcohol-to-jet technologies has encouraged corn and sugarcane ethanol producers to hope they have a path into SAF production.

Hydrogen can also be used to produce so-called efuels that pull waste carbon from a range of sources, process it with the hydrogen and then use chemical processes, such as Fischer-Tropsch, to produce liquid fuels.

The Rabobank report says that oilseed rape and sugarcane are the most “economically attractive feedstocks in Australia, both in cost terms and in the cost per unit of emissions reduced, but the use of grain could also be promising, along with municipal waste and cellulosic waste such as sawdust.

The report says that, for at least the next decade, “SAF can generate more demand for agricultural products and economic benefits for farmers,” but warns that this may change in the 2030s.

“In the longer term,” the report says, “the agricultural winners may lose out to non-agricultural feedstocks as other technologies advance and improve their efficiency and economics.”

For the moment, while much of Australia’s SAF demand is being driven by airline demonstration flights, demand within the country is expected to rise on the back of combined voluntary efforts from the airlines driven by the expected government incentives.

View our biofuels and feedstocks news, prices and analysis

What to read next
Fastmarkets will not publish any price assessments for corn, soybean, Americas vegoils and meals, or US wheat, on Wednesday June 19.
News that Chinese investors are pumping billions of dollars of investment into the production of sustainable aviation fuel (SAF) could re-write the dynamics around exports of used cooking oil (UCO), trade sources told Fastmarkets on Friday May 17
Dutch fuel supplier SkyNRG has released its latest sustainable aviation fuel (SAF) market outlook, forecasting substantial growth in SAF capacity and demand through 2050.
Updated forecast by trade association Cocereal pegs 2024 wheat crop slightly higher than previous projections
Fastmarkets wishes to clarify the specifications for its European animal fats price assessments.
A report by the USDA forecasts an increase in US ending stocks for 2024/25 to 769 million bushels, alongside a slight decrease in global stockpile estimates.