Agriculture and energy are becoming more tightly connected as renewable energy increases demand for input crops and creates alternative income opportunities for farms, said an Economic Bulletin from the Kansas City Federal Reserve Bank Tuesday.
KC Fed Economists Nate Kauffman and Ty Kreitman, authors of the bulletin, said, industry experts underscored these links at the Kansas City Fed’s Agricultural Economic Summit in May. Despite some longer-run uncertainties, summit participants expected energy investments and developments to have a significant influence on the future structure of ag and commodity markets.
NEW ENERGY FORMS GAINING
Although ethanol production has driven connections between agriculture energy in past decades, new forms of renewable energy and movements to limit greenhouse gas emissions were thought likely to further tighten connections between them, Kauffman and Kreitman said.
For example, production of Sustainable Aviation Fuel and biomass-based diesel have increased considerably in recent years, spurring heightened demand for soybean and other oils used to produce these fuels, they said. In addition, agricultural land has been used increasingly to harvest energy mostly through solar panels and wind turbines.
Those shifts toward renewable energy sources have been complemented by growing attention to carbon abatement, carbon sequestration and carbon intensity scoring, which is likely to have significant implications for the agriculture sector, the Fed’s Bulletin said.
NEW INVESTMENTS
The anticipation of increased demand for, and growth in, renewable energy markets has spurred large investments, the pair said, thereby expanding revenue opportunities for producers.
According to recent estimates by the Energy Information Administration, US production of SAF and other non-ethanol biofuels was forecast to be nearly three times larger in 2025 than it was in 2023, which likely will drive considerable demand for oilseed crops like soybeans, the economists said.
In addition, a modest but growing share of agricultural producers was pursuing solar electricity extraction as an additional revenue stream for farmland, the Fed report said. And while still relatively modest and subject to barriers, net-zero emissions commitments were expected to grow in the coming years, offering producers an opportunity to monetize carbon sequestration, they said.
Nearly two-thirds of participants in the Kansas City Fed’s recent Agricultural Economic Summit expected global demand for energy to be higher over the next 10 years.
Transitions to renewable energy sources have been largely policy-driven, they said. However, the degree to which existing policies will be sustained and new policies implemented is uncertain.
Thus far, various state and federal policies and subsidies have initiated and supported the viability of biofuel and SAF production, while other policy initiatives have promoted solar and wind energy and carbon measuring, the economists said.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $189.25 per cwt to $191.74, compared with last week’s range of $188.53 to $200.62 per cwt. FOB dressed steers, and heifers went for $298.42 per cwt to $303.67, compared with $296.77 to $310.09.
The USDA choice cutout Tuesday was down $2.13 per cwt at $315.81 while select was down $0.44 at $299.62. The choice/select spread narrowed to $16.19 from $17.88 with 148 loads of fabricated product and 34 loads of trimmings and grinds sold into the spot market.
The weighted average USDA listed wholesale price for fresh 90% lean beef was $376.88 per cwt, and 50% beef was $167.58.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.45 to $1.60 a bushel over the Sep corn contract, which settled at $3.88 3/4 a bushel, down $0.02.
No live cattle contracts were tendered for delivery Tuesday.
The CME Feeder Cattle Index for the seven days ended Monday was $255.35 per cwt, down $1.20. This compares with Tuesday’s Aug contract settlement of $243.00, down $1.00.