Food vs. Fuel: Why US Sustainable Crops Are Suddenly in High Demand

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October 16, 2025

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(Bain & Co.) New clean fuel incentives are reshaping US crop economics—and raising strategic risks for food companies. -- With clean fuel incentives, biofuels producers could pay twice as much per acre for sustainably grown crops—replacing food companies in the bidding. -- Food companies that don’t act risk tighter, costlier, or less sustainable supply chains as demand for resilience grows. -- Companies looking to stay ahead must map exposure, build flexibility, and work in partnership with biofuels companies.

Food companies have spent years investing in climate-resilient agriculture to secure reliable access to sustainable key ingredients. Many are partnering directly with farmers to promote regenerative practices—such as reduced tillage, cover cropping, and nutrient management—in the cultivation of row crops like corn and soybeans. PepsiCo, for example, plans to support regenerative farming on 10 million acres by 2030 and is already a third of the way there. Nestlé has set specific sourcing targets for ingredients grown using these practices. Across the industry, efforts to build resilience into supply chains with climate-smart agricultural practices are well underway. These practices also yield lower-carbon inputs.

Now, a powerful force could change the equation.

New and recently extended US regulatory incentives—including the Clean Fuel Production Credit, often called the 45Z tax credit—are set to accelerate demand for those same low-carbon-intensive crops as feedstock for clean transportation fuels. As of June 2025, the credits are available only for feedstocks grown in North America. Farmland conversion will no longer count toward biofuels’ carbon intensity, improving scores for agricultural feedstocks relative to non-agricultural alternatives.

With these incentives, biofuels producers likely could afford to pay farmers at least twice as much per acre to adopt regenerative farming practices, according to our analysis. And unlike food companies, biofuels producers are not expected to require complex measurement, reporting, and verification, making them especially appealing partners for growers.

This could both significantly accelerate the adoption of regenerative practices and also introduce complex competitive pressures for food companies—from higher prices and reduced ingredient availability to threats to both sustainability goals and supply chain resilience.

Emerging competition

The economics are clear. Corn and soybeans grown using regenerative practices could unlock up to $180 per acre in tax credits for biofuels producers—a good portion of which is expected to flow to farmers. By contrast, sustainability initiatives led by food companies typically offer $15 to $35 per acre today.

So, while food companies need these ingredients, other, larger market participants do too, and those groups may be in a stronger negotiating position. In 2025, 9% of domestically grown corn is expected to be used for human food and ingredients, according to USDA data compiled by the University of Arkansas. The rest will be used for ethanol production (35%), animal feed (38%), and exports (18%). Soy is similar: Only 8% of the US crop will be used for human consumption.

Some of food companies’ biggest competitors for these crops don’t have a single product in the grocery store. Biofuels producers’ growing appetite for them could reshape the competitive landscape in ways few food executives anticipated.

With global demand for biofuels expected to rise in the years ahead, food companies could face a more fragile, more expensive, and less predictable supply of critical ingredients (see Figure 1). Imagine a snack brand that has invested in establishing sustainable soybean oil production, with the expectation it could later buy the lower-carbon crops produced. If renewable diesel producers can outbid it for that same crop, the brand could be left unable to source, or afford, a sustainable version of the ingredients it most needs.

Figure 1

Rising global demand for biofuels will increase demand for resilient crops food companies depend on

GRAPH

Notes: Demand projections do not include e-fuels (synthetic fuels); base projection reflects current policies; accelerated projection assumes all government targets for biofuel use are met

Sources: International Energy Agency; Energy Information Administration; Bain analysis

Biofuels as food competitor—or ally

Agricultural commodities like corn and soy serve many purposes. Their derivatives, such as soybean oil, soy protein, and high-fructose corn syrup, are also used in many ways. When different industries need the same part of the crop, competition is inevitable. Soybean oil, for instance, is used in both mayonnaise and renewable diesel.

In certain cases, however, food, fuel, and animal feed can be complementary. Increased production of low-carbon-intensive soybeans for oil for renewable diesel, for example, would also increase the production of other sustainable byproducts, such as soybean meal. As the supply of sustainable soybean meal rises and prices drop, food manufacturers that use soy proteins and farmers who use meal in their animal feed would both benefit.

The critical question for food companies is this: Are you competing with biofuels for the same crop or commodity, or purchasing something that could benefit from biofuel investments?

A lesson from history

The food vs. fuel debate is not new, and this isn’t the first time policy-driven demand has reshaped agricultural markets. Between 2005 and 2012, inflation-adjusted US corn prices jumped 193% (see Figure 2). One of the key drivers: government mandates that significantly increased demand for ethanol.

That spike came during a period of severe drought, and even the 15 million additional acres that had been planted to meet the ethanol mandate weren’t enough to satisfy the demand.

Food companies responded in different ways. Some reformulated products. General Mills, for example, replaced high-fructose corn syrup with a mix of cane and beet sugar in its Yoplait yogurt. Others absorbed the higher costs or passed them along to consumers. Over time, technology and efficiency gains helped supply rebound, but the margin pressure and volatility left a lasting mark.

Today’s potential biofuels boom may not unfold in the same way, but the strategic risks are familiar.

Higher commodity prices should generate upside for farmers and traders. Livestock producers could benefit from an expanded supply of low-carbon-intensive byproducts for animal feed. But consumers may see higher prices, and food companies could find themselves with supply chains that are less resilient and key ingredients that are more expensive or not of the quality desired.

Figure 2

US policy helped spark an ethanol boom in the mid-2000s

GRAPH

Note: Inflation-adjusted to 2023 USD

Source: USDA Economic Research Service – Feed Grains Database

Three ways food companies can get ahead of the curve

The next wave of biofuel capacity expansion is already taking shape, and it could reshape regional agricultural markets within the next three to five years. Food companies that don’t act now risk being caught off guard by a shift they could have anticipated.

To maintain access to sustainable ingredients at the right cost, quality, and scale—and build resilient supply chains—companies should focus on three priorities.

1. Pinpoint exposure and quantify risk

Start by mapping your most critical ingredients and sourcing regions. Identify overlaps with crops used in biofuels and regions that are likely to see biofuel capacity expansion. Quantify how these overlaps could directly or indirectly affect your ability to secure a sustainable supply of your key inputs and at what cost.

Two hypothetical cases illustrate the range of possible outcomes:

High risk: A beverage company using high-fructose corn syrup may find itself in direct competition with ethanol producers sourcing the same crop in the US Midwest—a center of biofuels production—leading to constrained access and higher prices.
Low risk: An ingredients company extracting soy protein from soybean meal may benefit from rising demand for low-carbon soybean oil. As biofuels producers pay to decarbonize the crop for oil, the resulting increase in low-carbon-intensive soy meal could support the ingredients business.

2. Design for flexibility and resilience

Explore sourcing alternatives and develop contingency plans before constraints emerge. Consider alternative sourcing regions first. Then, consider the possibility of flexibly reengineering formulations. The Yoplait reformulation from high-fructose corn syrup to sucrose was a response to market pressure, but it also enabled the brand to position itself as healthier for consumers. The same approach could help companies navigate rising costs through reformulation, premiumization, or both.

3. Create partnerships with biofuels companies

Partnering with biofuels producers can support regenerative farming and provide access to sustainably grown crops. For example, a food company and an ethanol producer could jointly support farmers in a corn-soy rotation. The biofuels company would benefit from low-carbon-intensive corn and qualify for 45Z tax credits. The food company would secure access to sustainably grown soy, along with its associated Scope 3 emissions reductions. And the farmer could more confidently embark on the transition to regenerative farming practices thanks to the promise of greater financial incentives.

These kinds of collaborations can remove risk and align incentives across growers, clean fuel companies, and food brands alike.

The complexity is just beginning

Supply chain management is no longer just about securing volume at the right price and quality. It’s about navigating a landscape shaped by overlapping markets, changing policies, and competing priorities—a world that now demands stronger, more resilient supply chains.

As extreme weather events increase and temperatures rise, supply chain resilience will be mission critical. If you can’t source tomatoes, you can’t make ketchup. If you can’t get enough water, you can’t make beer. And now, food companies must compete not only for agricultural land but also for the farmers willing to adopt resilient practices. The future of many food companies may sit in an unexpected place—the procurement department. Food companies that act now by assessing risk, diversifying inputs, and building new partnerships will protect their supply chains and position themselves to lead in a world in which supply chain resilience is critical.

The food industry’s resilience will depend on how quickly companies adapt to this new reality and seize the chance to lead, not just respond. READ MORE

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