WASHINGTON, Feb. 18, 2026 - The proposed federal 45Z clean fuel tax credit is reshaping the outlook for U.S. corn producers as demand growth for conventional ethanol stalls and uncertainty clouds commodity markets. Announced by the Treasury Department just days before the Iowa Renewable Fuels Summit, the guidance ties biofuel incentives to carbon intensity scores - a shift that could reward regenerative agriculture practices and determine whether corn prices stagnate near $4 or surge toward $6 per bushel over the next decade.

At the Iowa Renewable Fuels Summit in Altoona on Feb. 5, agricultural economist David Miller of Decision Innovation Solutions outlined three potential scenarios for corn markets.

The first scenario projects corn hovering around $4 per bushel, a level many producers consider below breakeven, based on a USDA outlook showing 10% fewer planted acres.

A second scenario assumes declining acreage and zero demand growth, pushing corn toward $2.20 per bushel - the floor at which government loan programs activate. Under that outlook, only a major weather event such as drought would meaningfully tighten supplies.

The third - and most optimistic - path depends on nationwide, year-round E15 fuel sales and a robust market for ultra-low carbon ethanol. That combination could lift corn as high as $6 per bushel, driven by new demand streams in aviation and marine fuels.

"The demand that can come off ultra-low carbon ethanol as a feedstock is unlimited," Miller said.

45Z Shifts Incentives to Carbon Scores

The proposed 45Z tax credit replaces the previous flat $1-per-gallon blender's credit with a value tied directly to a fuel's lifecycle carbon intensity (CI) score. Lower emissions across the supply chain translate into larger credits.

For corn producers, that means on-farm practices matter more than ever. Reduced tillage, no-till systems, cover cropping and improved nutrient management can lower CI scores, potentially increasing the value of ethanol derived from that grain.

Iowa farmer Mitchell Hora, founder of soil data firm Continuum Ag, said the Treasury proposal signals that low-carbon feedstocks will play a meaningful role.

"It will help create a nice 45Z credit that's a big enough pie to make it worth it," Hora said, noting that a forthcoming federal feedstock calculator is expected to provide clarity for producers investing in regenerative practices.

Currently, adoption remains limited. Nationwide cover crop use is estimated at just 5% of acreage, underscoring both the opportunity and the scale of change required.

Competition From Brazil and Policy Questions

U.S. corn has faced mounting pressure to decarbonize as Brazilian ethanol posts lower carbon intensity scores, giving it an edge in emerging sustainable aviation fuel markets. The world's first commercial ethanol-based SAF plant, now operating in Georgia, has favored lower-CI inputs.

Still unresolved are key policy questions. Producers await clarity on whether a "book and claim" system will allow carbon data certificates to be traded independently from physical grain shipments - a mechanism that could expand participation.

Former USDA Chief Economist Seth Meyer expressed disappointment that Treasury's draft guidance did not fully incorporate earlier climate-smart agriculture frameworks developed under the previous administration. Treasury officials have indicated that further rulemaking could integrate those recommendations, though no timeline has been provided.

Bipartisan Interest in Sustainable Agriculture

Despite political shifts, momentum around regenerative and sustainable agriculture appears to be building. In December, USDA's Natural Resources Conservation Service launched a $700 million regenerative pilot initiative. Meanwhile, a draft farm bill released by House Agriculture Committee Republicans includes language supporting climate resilience and strategies to advance sustainable aviation fuel production.

Industry voices see opportunity in reframing the conversation.

"There's a bipartisan moment happening with sustainable agriculture," said Mike Aquino of the International Dairy Foods Association during a recent Capitol Hill panel.

For corn producers navigating volatile commodity prices, rising input costs and uncertain export demand, the 45Z credit may represent more than a climate policy - it could become a cornerstone of future profitability.

Whether regenerative agriculture scales quickly enough to unlock that potential will help determine which of the three corn price paths becomes reality.