With a global focus on clean energy transition, the use of biofuels could be favorable for soybean prices. Some traders are already forecasting a bump in prices, but regulatory measures by the incoming U.S. presidential administration in 2025 could add to that momentum.
“Soybean oil was one of the drivers for the post-election rally,” Farm Progress noted. “Biodiesel may be green but it’s also being blended, helping make sure there’s enough ultra-low-sulfur diesel to go around. Some traders loaded up on Chinese soy ahead of any trade war, pulling prices briefly higher in the complex right after the election.”
With biofuels use gaining momentum, investors can get exposure to higher soybean demand via the Teucrium Soybean Fund (SOYB ). The fund provides similar exposure to what investors could obtain by trading in soybean futures contracts. It is also an option for longer-term buy-and-hold investors who want to diversify their current portfolios with commodities exposure. Additionally, if short-term traders want to take advantage of upside in soybean prices, SOYB can serve that purpose.
As mentioned, a momentum driver for soybean prices moving forward could also hinge on how the incoming administration under President-elect Donald Trump in 2025 will handle tax credits for clean energy fuels.
Organizations Push for Tax Credit Extension
Ethanol Producer Magazine reported that 36 trade organizations — including the Advanced Biofuels Association, American Biogas Council, Coalition for Renewable Natural Gas (RNG Coalition), Iowa Biodiesel Board, Renewable Fuels Association, and Sustainable Advanced Biofuel Refiners — lobbied for Congress to extend expiring tax credits. In particular, extending the 40A biodiesel tax credit, the 40B sustainable aviation fuel (SAF) tax credit, the 40(b)(6) second generation biofuel producer credit, the 48©(1) qualified fuel cell investment tax credit, the 48©(7) qualified biogas investment tax credit, and the 6426 ,6427 alternative fuel tax credit.
“As you know, beginning January 1, 2025, and following enactment of the Inflation Reduction Act of 2022 (PL 117-169), the tax code institutes a planned shift from the longstanding structure of energy tax incentives flowing from the Energy Policy Act of 2005 toward a new ‘technology-neutral’ energy tax regime,” the groups noted in a letter to Congress. “This new regime, anchored by the Section 48E clean electricity investment tax credit, 45Y clean electricity production tax credit, and 45Z clean fuels credit, will represent a significant change for which many of our companies and industries have spent much of 2024 planning."
They noted that there has been no implementation on final regulation policies from the U.S. Treasury, which adds uncertainty in 2025. They pushed for a short-term solution that could be beneficial if enacted sooner rather than later.
“Particularly given the upcoming 2025 tax policy debate, enacting a modest, short-term tax package this fall would help to ensure energy and agriculture market stability and predictability while preserving grounds for an open energy and tax debate in the 119th Congress,” the groups added further.
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