Agriculture Analyst Biofuels Primer Why Crop Prices Increasingly Follow Fuel

Commodities Research 11 August 2026 | 6:00AM EDT

Biofuels Primer: Why Crop Prices Increasingly Follow Fuel

n Biofuels are a ~3.5 million barrels per day (mbd) industry, used almost entirely in Daan Struyven | transport and concentrated in the US, Brazil, and the EU, which together account Goldman Sachs & Co. LLC for roughly 80% of global production. Biofuels are becoming a more important Lina Thomas driver of crop prices. Higher oil prices in 2026H1 boosted biofuel demand, while | energy diversification and farm-income concerns may push governments to raise Goldman Sachs International

blending mandates further (e.g., Brazil to E32 and Indonesia to B50). Higher oil Yulia Zhestkova Grigsby | prices and rising blending mandates divert a larger share of crops from food and Goldman Sachs & Co. LLC feed into fuel, tightening the link between biofuel demand and crop prices. n Different biofuels use different feedstocks. Ethanol is produced from corn and sugarcane and blended into gasoline, while biodiesel is produced from vegetable oils such as soybean, rapeseed, and palm oil and blended into diesel. Renewable diesel is produced mainly from waste fats and used cooking oils and can be used as a direct substitute for conventional diesel. Local feedstock availability often determines the biofuel type, with the US specializing in corn ethanol, Brazil in sugarcane and corn ethanol, Indonesia in palm biodiesel, and Europe in rapeseed biodiesel. n Policy and oil prices drive biofuel demand subject to infrastructure constraints. In the US and Europe, fuel blending mandates primarily determine biofuel demand as governments support farm incomes and energy diversification. In Brazil, higher fuel prices and government subsidies for biofuel also make biofuels more competitive relative to oil fuels and encourage drivers to switch fuels. However, the “blend wall” — the maximum share of biofuels that existing fuel infrastructure, engines, and vehicle fleets can absorb—ultimately limits US and EU biofuel demand growth. n Stronger biofuel demand supports feedstock prices. Short-term supply flexibility exists —for example, Brazilian mills can switch sugarcane between sugar and ethanol production. However, feedstock supply is ultimately fixed within a crop year and building new processing capacity takes time. Stronger biofuel demand, whether driven by higher energy prices or higher blending mandates, therefore tends to support feedstock prices by intensifying competition for crops across food, feed, and fuel demand.

The authors would like to thank Samuel Jönsson — an intern on our commodities research team — for his extensive contributions to this report.

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Goldman Sachs Agriculture Analyst

Biofuels Primer: Why Crop Prices Increasingly Follow Fuel

Biofuels are a ~3.5mbd industry used almost entirely in transport (~95% of consumption) and concentrated in the US, Brazil, and the EU, which together account for roughly 80% of global production (Exhibit 1).

Exhibit 1: Biofuel Production Is Estimated to Reach ~3.5Mbd In 2026, With the US, Brazil and the EU Accounting for ~80% of Global Production

Source: IEA, USDA, Goldman Sachs Global Investment Research

Higher oil prices in 2026H1 boosted biofuel demand, while energy diversification and farm income concerns may encourage governments to further raise biofuel blending mandates. In the US, the share of soybean oil used for biofuels has risen from 40% in 2020 to ~55% in 2026 (Exhibit 2). Governments have recently increased the mandatory ethanol blend to 32% in gasoline in Brazil and to 50% in palm biodiesel in Indonesia. As biofuel demand grows further, a larger share of crops is diverted from food and feed into fuel production, making biofuels an increasingly important driver of crop prices.

In this primer, we review the feedstocks used by different biofuels, analyze how oil prices and biofuel mandates affect biofuel demand, and feedstock prices1.

1 For a detailed prior primer on this topic, see Currie et al., “Food, Feed and…