After decades of pursuing sales to foreign buyers, the U.S. crop sector is “once again becoming domestic market-focused, due mainly to biofuels policy,” said Scott Irwin, an agricultural economist at the University of Illinois, on Wednesday. It would be a significant, albeit gradual, change in focus.
Twice as much corn will be used to make ethanol as is exported this year, according to USDA estimates. The boom in renewable diesel fuel, with soybean oil as the leading feedstock, is obliterating soy oil exports.
“My explanation is that the U.S. crop sector is in the process of reinsulating itself from the world market,” wrote Irwin in a blog that cited the 1996 Freedom to Farm law — which removed most federal controls over what farmers plant — as the end of U.S. supply management policies. “Apparently, U.S. crop farmers prefer insulated domestic markets.”
Exports have been the lodestar of U.S. agriculture since the big Soviet grain deals of the Carter and Reagan years. One-fifth of U.S. farm production is exported, so the sales are an important part of farmer income.
Congress created the Renewable Fuel Standard, which guarantees biofuels a share of the gasoline market, in 2005. California has encouraged low-carbon transportation fuels since 2011. The 2022 climate, healthcare, and tax law offers incentives for low-carbon fuel, including sustainable aviation fuel.
“The decreased prominence of the United States in global soybean markets reflects in part the growth of domestic soybean demand … particularly from the renewable diesel sector,” wrote agricultural economists Joana Colussi, Gary Schnitkey, Joe Janzen, and Nick Paulson of the University of Illinois at the farmdoc daily blog. “In the last few years, American farmers have diversified the markets for their soybeans and reduced their reliance on China, compared to Brazil.” China buys half of U.S. soybean exports and more than 70 percent of Brazil’s soy exports.
Brazil, which surpassed the United States as the world’s largest soybean exporter in 2013, is now running neck and neck with the United States in corn exports and is a close second in cotton sales.
“My point is not that the U.S. is going to 100 percent leave global crop markets. That is obviously never going to happen,” wrote Irwin. “But if you step back and take a big-picture look at what is happening, this is the strategic direction of the U.S. crop sector” — domestic markets. “It started with the Renewable Fuel Standard (RFS) in 2005 and 2007, accelerated with the renewable diesel boom, which has priced the United States out of the global soybean oil market, and new low-carbon fuel incentives will be the next step in the decoupling.”
Pat Westhoff, director of a think tank at the University of Missouri, offered a slightly different perspective. “I’m sure some people deliberately want to insulate U.S. agriculture from world markets, but I think the main push is to simply expand markets in any way possible. … Almost anything that would expand the overall amount of demand for U.S. crops will be seen as a good thing by people who produce those crops,” he said.
The allure of exports has faded in recent years, following the disruptions of trade war and pandemic and concerns about reliable supply chains. In 2017, in one of his first actions in office, President Trump withdrew the United States from the Trans-Pacific Partnership, negotiated by Obama officials. Although food and ag exports fell 6 percent during the Sino-U.S. trade war started by Trump in 2018, farmers stood by the president. If he is elected to another term, Trump says, he would impose a 10 percent tariff on all imports and set duties on Chinese goods at 60 percent or higher.