Despite a $6 billion investment boom in soybean crush capacity, designed to feed demand for renewable diesel and other clean fuels, the U.S. soybean sector is still stalled. Growers and processors alike blame a familiar culprit: federal policy uncertainty.

At the center of concern is the 45Z tax credit, a Biden-era incentive restructured under President Donald Trump's administration, now aimed at rewarding low-carbon, domestically sourced fuels. But delayed implementation has left the industry guessing - and hurting.

"When it comes to increasing demand for row crops, our first stop is biofuels," said Deputy Agriculture Secretary Stephen Vaden.

Delayed Guidance Leaves Market in the Dark

The White House budget office has pushed implementation to May 2026, despite 45Z officially taking effect in January. That delay triggered a 30% decline in renewable diesel consumption in the first half of 2025 compared to the same period last year.

Sen. Chuck Grassley (R-Iowa) blasted Treasury officials last month, calling the May timeline "unacceptable" during a Senate Finance Committee hearing.

"Policy uncertainty is the No. 1 hindrance to our industry's growth," said Kurt Kovarik, VP of federal affairs at the Clean Fuel Alliance America.

The industry is further confused by unclear guidance issued just before Biden left office, which legal experts say lacks sufficient authority to ensure compliance.

"Tax lawyers can't even say with certainty whether a producer qualifies," said Tim Urban of the law firm Bracewell.

Producers Face Mounting Headwinds with No Relief in Sight

While fuel producers operate at just 60-70% of capacity, soybeans are piling up on farms, thanks to favorable harvest weather and limited export demand.

"The China market is closed off, and they've got a big crop coming," said Devin Mogler, CEO of the National Oilseed Processors Association.

"It's dry at harvest, so it's going quickly and the bushels are piling up."

The ongoing trade freeze with China, the world's top soybean importer, continues to hurt U.S. growers. The issue stems in part from Trump-era tariffs, now entering their seventh year.

April Hemmes, a farmer in Iowa and board member of the United Soybean Board, says farmers are bracing for difficult conversations with lenders this fall.

"Most of the farmers I have talked with are just worried about the conversation with the bankers," she said.

Domestic Sourcing Rule Adds More Pressure

Another controversial feature of the new 45Z rule is that eligible biofuels must be made from North American ingredients - a move designed to favor U.S.-grown soybeans, but one that some biofuel makers oppose, fearing it limits feedstock flexibility and could raise consumer fuel costs.

A similar restriction appears in the EPA's proposed biofuel-blending rules, which are still pending finalization.

Meanwhile, with producers sitting on large soybean inventories and processing plants underperforming, farmer confidence continues to erode.

"This is just adding to the list of problems and market hurdles row crop producers face this year," said an industry economist.