The Growing Ag-Energy Link | Presented by CME Group

Summary

• A direct cross-commodity relationship exists between energy prices and row crops, specifically corn and soybeans.
• Approximately 40% of the US corn crop is used for ethanol, producing about 15 billion gallons annually blended into the gasoline supply via the Renewable Fuel Standard.
• Rising gasoline prices improve ethanol blending economics, causing refiners to compete more aggressively for corn, which directly influences CBOT corn futures prices.
• Soybean oil is the dominant feedstock for the US biodiesel and rapidly expanding renewable diesel sector.
• The link between soybean oil and diesel has intensified sharply in recent years, driven by major refiners pouring capital into renewable diesel capacity.
• Soybean oil has effectively transitioned from a purely agricultural commodity to an energy commodity, competing directly with petroleum diesel at the refinery level.
• The corn-ethanol linkage is a long-standing structural relationship, while the soy-diesel link is a more recent and accelerating dynamic.
• These connections mean energy market movements now have a more immediate and consequential impact on agricultural commodity pricing and demand.