By Joe Waddell, Director of Market Innovation

Renewable diesel is an advanced biofuel made from renewable feedstocks, and it has been gaining signification traction over the past few years as a cleaner alternative to traditional diesel fuels, which are derived from fossil fuels. This up-and-coming energy source has favorable greenhouse gas (GHG) reduction scores among current programs, including the Renewable Fuel Standard (RFS) and the California Low Carbon Fuel Standard (LCFS). The biomass-based diesel tax credit and other tradeable credit prices have been relied upon for renewable diesel producers to turn a profit and will likely continue to play a part, but the ramp-up in renewable diesel production could have a significant impact on oil seed crops over the next decade.

Renewable Diesel v. Biodiesel

Renewable diesel and biodiesel are derived through separate production processes and have different properties.  What they do have in common is the feedstocks from which they can be created. Some common feedstocks used are soybean and canola oil, among other oil seeds and biogenic wastes (oils, fats, greases). Biodiesel is produced through a process called transesterification, which produces a nonhydrocarbon fuel. Biodiesel is typically blended with petroleum diesel (from B5 up to B20, 5-20% bio diesel). Biodiesel has a higher cloud point than both petroleum and renewable diesel, which limits its use in cold climates and makes it is more susceptible to microbial growth when not properly stored.

Renewable diesel is produced through hydrotreating or hydrocracking, a sophisticated refining process like the one used in traditional diesel fuel production. Due to the similar production process, renewable diesel results in a “drop in” replacement hydrocarbon fuel (with a higher production cost than biodiesel), meaning that it can be run as a standalone replacement for traditional diesel.

Why Should We Care About Renewable Diesel?

Both biodiesel and renewable diesel produce less GHG over their lifecycle assessments versus petroleum-based diesel. Renewable diesel has the potential to help the U.S. meet aggressive GHG emission reduction targets with its ability to be a “drop in” replacement for traditional petroleum diesel.

The renewable diesel production sector has outpaced current EPA Renewable Volume Obligations (RVO) projections. While the draft RVO numbers are out, the final numbers must be set by June 14, 2023. The capacity output for renewable diesel is projected to double by the year 2025, while the RVO currently only project a slight increase. At this year’s Commodity Classic, it was mentioned that U.S. Secretary of Agriculture Tom Vilsack was working with the EPA in an attempt to get the RVO numbers revised upwards, reflecting production capacity that will be coming online. If the EPA does not revise numbers upward to reflect capacity, it will put a major damper on the renewable diesel outlook. It will be interesting to see if there are any revisions upon final release this summer, as the RVO will directly impact actual production of renewable diesel output.

In summary, renewable diesel has the potential to have a significant impact on oil seed crops (such as soybean and canola) with an increased demand on feedstocks, while providing new revenue streams from crop residues and biogenic waste (oils/fats/grease), improving the sustainability of agricultural practices and contributing to rural economic development. The challenge will be balancing the production of renewable diesel and food production. There are several companies working to develop oil seeds for cover crops that can be used for renewable diesel production which would alleviate some concern over the use of food production for renewable diesel production.  Renewable diesel has a huge potential to benefit both the ag sector and the environment for the long term if the RVO numbers can be revised to reflect actual production capacity coming online.

We’ll be keeping an eye on this topic to see how it evolves and its impact on our customers and community members. If you have any questions on renewable diesel, or just want to talk shop on the many innovations happening in the ag industry, please feel free to give me a call at 814.573.8341 or email jwaddell@horizonfc.com.

A successful farming operation doesn’t happen by chance. It takes tremendous expertise, exceptional commitment, a great deal of planning, and a tireless work ethic.  Maximizing farm profitability also takes substantial business knowledge and management skills.  In both the technical and business aspects of farming, it is important to build relationships, establish a network of subject matter experts, and constantly work to gain knowledge.  Identifying--and tapping into--available resources can help farmers establish and grow their operations.

Farm Credit is a member-owned cooperative that has been supporting agriculture and rural communities for more than 100 years.  The Association is invested in the success of its members and the industry as a whole.  To that end, the Association has developed numerous programs to help farmers in every stage of business achieve their goals.  Resources are available to assist with business plan development, record keeping, tax preparation, succession planning, and more.

Most recently launched is the Farm Credit Grow Ahead program.  It was developed specifically to help the next generation of farmers establish and grow their operations. Grow Ahead features new financing options to help these farmers access the capital they need, as well as educational offerings, mentoring opportunities, and grant programs.

Loans through the new Grow Ahead program feature discounted pricing, reduced fees, customized loan terms, and relaxed underwriting requirements. Grow Ahead loans for young and/or beginning farmers can work in collaboration with FSA loan programs and are eligible to receive patronage.

In addition to new financing options, the Grow Ahead program offers grant and award opportunities, including the JumpStart Grant Program, which awards $10,000 grants annually to top applicants in the start-up phase of business with less than two years of farming experience, and the Farmers on the Rise Award Program, which gives $10,000 awards to top applicants with three to ten years of farming experience. 

Grow Ahead also brings together educational and mentoring resources to help farmers achieve their goals. They can develop business plans and farm business management skills through Ag Biz Basics and Ag Biz Masters educational courses. Through a partnership with the SCORE network of business professionals, beginning farmers can be paired with a mentor who is well-established within the agricultural industry. 

“The future of our industry depends on young and beginning farmers,” said Tom Truitt, Chief Executive Officer of Horizon Farm Credit. “Farm Credit is committed to ensuring that they have the tools they need to start and grow their operations, achieve their dreams, and realize long-term financial success,” he continued. “We’ve developed the Grow Ahead program specifically to meet the needs of these farmers and are excited about the opportunities it presents for them. I hope that those eligible will take full advantage of the valuable resources available through this program.”

Grow Ahead offerings are available to both full-time and part-time farmers within the Horizon Farm Credit footprint. Click here to learn more.

Kara Miller & Nicole Myers, Farm Credit Home & Land Loan Officers

When considering the purchase of their first home, many prospective buyers aren’t sure where to start. Most have a clear vision of their dream property, but don’t know what they can afford, how to obtain financing, or what they should do to prepare.  Over the years, Farm Credit’s Home and Land division has helped thousands of first-time homebuyers successfully navigate the purchase process.  While each situation is unique, there are some principles that are broadly applicable and will prove helpful to anyone seeking homeownership. 

1. Establish Good Credit History

• Make on-time payments on any outstanding debt. Late payments will negatively impact credit scores and will be a disadvantage to those seeking mortgages.
• Avoid making minimum payments if possible. Try to pay your credit card balance in full each month.
• Develop—and stick to--a budget. Make sure that any new charges can be paid off monthly. This will reduce the amount of interest paid and will enable more of your payment to go toward paying down balances. 

2. Save! Save! Save!

• Save up money for down payment and closing costs. While a down payment of 20% or more can significantly reduce borrowing costs, there are financing options that require far less down--3%, 5%, 10% or even 0%. Closing costs will vary, due to differences in loan amounts and property types, however they typically range from 5-8% of the loan amount. Planning ahead and saving for these expenditures is key!
• Short-term sacrifices can produce great savings in the long run.
• Larger down payments often lead to reduced rates and more financing options.

3. Find a Lender and Explore Options

• Talk with your lender about the different loan options available.
• Do some research into products that may be applicable to your financial situation and goals. Private Mortgage Insurance (PMI) can be a new home buyer’s best friend, if a 20% down payment is out of reach.
• Plan for the costs associated with purchasing a home, which can include lender fees, title and legal fees, appraisal fees and realtor/broker fees.

4. Get Pre-Qualified

• Work with a lender to determine what price point you can afford.
• Don’t make any big purchases or major life changes after you get pre-qualified.  Lenders base their decisions on the circumstances presented to them; if there are changes to employment or debt load after pre-qualification, the pre-qualification may be revoked.
• If you don’t get prequalified for your desired purchase right away, it’s not over! Your lender will help guide you on the steps necessary to secure pre-qualification in the future.
• Interest rates are higher than they were in 2020, so ask your lender about any programs that would allow for downward adjustments if interest rates were to fall during the term of your loan.  Note modifications or refinancing may be options.  

5. Work with a real estate agent to find your dream house

• Many real estate agents are very knowledgeable with specific types of homes-- farms, large acreage, or residential properties, for example. Do your research on who specializes in the type of property you want to purchase.
• Springtime is typically when inventory peaks and more houses come on the market.
• Be patient-- the right opportunity will come!

To learn about the financing options available through Farm Credit, please visit horizonfc.com/loans.

Kara Miller has been a Farm Credit Home and Land lender for over five years. She specializes in home construction loans on larger acreage properties and has financed everything from traditional stick builds to bardnominiums.

Nicole Myers has been a Home and Land lender with Farm Credit for the last three years. She specializes in financing new home construction and bare land purchases.

Horizon Farm Credit announced the launch of its Grow Ahead program, which features new financing options to help the next generation of farmers access the capital they need, as well as educational offerings, mentoring opportunities, and grant programs to help them establish and grow successful operations.

Loans through the new Grow Ahead program feature discounted pricing, reduced fees, customized loan terms, and relaxed underwriting requirements. Grow Ahead loans for young and/or beginning farmers can work in collaboration with FSA loan programs and are eligible to receive patronage.

In addition to new financing options, the Grow Ahead program offers grant and award opportunities, including the JumpStart Grant Program, which awards $10,000 grants annually to top applicants in the start-up phase of business with less than two years of farming experience, and the Farmers on the Rise Award Program, which gives $10,000 awards to top applicants with more than two years of farming experience.  

Grow Ahead also brings together educational and mentoring resources to help farmers achieve their goals. They can develop business plans and farm business management skills through Ag Biz Basics and Ag Biz Masters educational courses. Through a partnership with the SCORE network of business professionals, beginning farmers can be paired with a mentor who is well-established within the agricultural industry. 

“The future of our industry depends on young and beginning farmers,” said Tom Truitt, Chief Executive Officer of Horizon Farm Credit. “Farm Credit is committed to ensuring that they have the tools they need to start and grow their operations, achieve their dreams, and realize long-term financial success,” he continued. “We’ve developed the Grow Ahead program specifically to meet the needs of these farmers and are excited about the opportunities it presents for them. I hope that those eligible will take full advantage of the valuable resources available through this program.”

Grow Ahead offerings are available to both full-time and part-time farmers within the Horizon Farm Credit footprint. Visit horizonfc.com/growahead to learn more.