The Harvest is a series covering insights, updates, and developments in agriculture.

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In today’s breakdown:

1. The end of 40A biodiesel tax credit

2. The silent crisis of soil degradation

3. Farm bill extension and what it means for U.S farmers

4. Panama Canal Surcharges

5. Sundial foods closes down

(1) RIP 40A: What the end of the Biodiesel Tax Credit could mean to us.

After a 20-year run, the 40A Biodiesel Tax Credit officially retired on January 1, 2025.

This $1-per-gallon lifeline for biodiesel and renewable diesel blends (including imports) has been a cornerstone of U.S. biofuel policy since 2005. While it wasn’t tied to carbon intensity metrics, it kept biodiesel competitive against petroleum and helped the industry grow.

So, what’s next? The 40A credit didn’t just disappear—it morphed into the 45Z production tax credit. The catch? 45Z focuses on production, not blending, and prioritizes carbon intensity. For producers, this could mean more lucrative opportunities if they meet the sustainability benchmarks. But without clear Treasury guidance on how 45Z will work, there’s a lot of uncertainty.

The ripple effects

• Winners and losers: Big biodiesel producers with efficient, low-carbon operations could thrive under 45Z. Smaller or less efficient players? Not so much.

• Imports take a hit: The 40A credit applied to imported biodiesel. With 45Z focusing on domestic production, foreign suppliers might struggle to compete.

• Farmers and feedstocks: Soybean and canola growers (key biodiesel feedstocks) could see shifts in demand. Will 45Z’s carbon metrics favor alternative feedstocks like waste oils?

• Transportation’s carbon pivot: The move from blending incentives to production credits reflects a broader push for decarbonization. This could accelerate innovation but might also shake up established supply chains.

Why this Matters

The end of 40A signals a shift in how Washington approaches renewable fuels. It’s not just about volume anymore, it’s about sustainability and impact. Expect market disruptions as the industry adapts, but also opportunities for those who can align with the new rules.

Bottom line: 40A’s death isn’t the end, it’s the start of a new chapter.

(2) The silent crisis under our feet

Here's a wake-up call: the soil we rely on for our food is in serious trouble. Experts are raising alarms about a worldwide soil crisis that could increase grocery costs and shake up food supplies.

What's happening? 

The stats are alarming. The FAO says 33% of our planet's soil is already damaged, and if we keep going this way, 90% could be by 2050. Too much farming, cutting down forests, and climate change are causing soil to erode faster than it can regenerate, making this once endless resource now limited.

In the U.S., almost half of the land used for major crops is showing signs of wear. This leads to lower crop yields, forcing farmers to use more expensive methods to keep up production. In some places, crop yields might fall by up to 50%, pushing food prices even higher.

Why it matters 

For those in agriculture and those investing in it, this isn't just about the environment, it's about money and how we farm. Bad soil means higher farming costs, messed-up supply chains, and unpredictable markets, hitting profits and food security hard.

Globally, over 3.1 billion people already struggle to eat healthily, and poor soil health will only make this worse.

(3) Farm bill extension: What it means for farmers and the future of U.S. agriculture

Mid December 2024, Congress narrowly avoided a government shutdown by passing a spending package that includes a one-year extension of the farm bill and $10 billion in economic aid for farmers. While the extension offers temporary relief, it also highlights deeper challenges in U.S. agriculture policy.

Key takeaways from the farm bill extension

1. Economic relief for farmers

   • The extension provides $10 billion in one-time payments to help farmers combat low commodity prices, rising costs, and natural disasters.

   • Farms without federal crop insurance can qualify, and payments are capped at $125,000 or $250,000, depending on income structure.

2. Disaster recovery funds

   • An additional $20 billion is allocated for recovery from droughts, hurricanes, and other natural disasters over the past two years.

3. Avoiding a policy cliff

   • Without this extension, key farm safety net programs would have reverted to outdated Depression-era laws, potentially causing food prices to skyrocket.

What’s next for 2025?

Passing a comprehensive farm bill in the next Congress will require bipartisan cooperation. Challenges include:

• Committee restructuring: Delays in forming new agriculture committees could push negotiations well into 2025.

• Economic pressures: Declining farm income and tighter lending policies have created a cautious environment for producers.

• Policy priorities: Balancing the needs of climate resilience, food security, and economic sustainability will shape the final bill.

Farmers are facing mounting pressures from volatile markets, natural disasters, and policy uncertainty. The financial assistance provided by this extension is critical for maintaining cash flow, securing loans, and ensuring the stability of rural communities.

As Russell Boening of the Texas Farm Bureau aptly put it: "Economic assistance to farmers is not a cost, it’s an investment in the future of our food security."

(4) Panama canal surcharges: What shippers need to know for 2025

Starting January, ocean carriers CMA CGM and MSC will introduce surcharges on cargo transiting the Panama Canal, a response to increased costs stemming from the canal’s new reservation system. These surcharges will affect key trade routes between Southeast Asia and the U.S. East and Gulf Coasts, as well as South America and North America.

Why the surcharges?

The Panama Canal Authority recently launched a new booking system, Long-Term Slots Allocation (LoTSA), aimed at improving cargo flow amid ongoing challenges like low water levels. While this system provides carriers with options for securing vessel slots via bidding, it has also driven up operational costs for carriers like CMA CGM, which cited “significant increases” in a December statement.

Key features of LoTSA:

• Carriers can bid for long-term slot packages.

• Secured slots exempt carriers from certain canal surcharges.

• Unlimited swaps and substitutions are allowed with eight days’ notice.

The broader impact on trade

The Panama Canal is a critical artery for global trade, especially for U.S. grain exporters. In 2023 alone, the canal facilitated:

• 29% of U.S. soybean exports.

• 18% of U.S. corn exports.

• 91% of U.S. sorghum exports.

However, persistent low water levels have reduced vessel capacity, forcing some cargo to divert to alternative routes. This has amplified costs and complicated logistics for shippers reliant on the canal’s efficiency.

Challenges ahead for shippers

These surcharges come at a time when global trade is already navigating rough waters:

• Geopolitical Risks: President-elect Donald Trump’s tariff policies could disrupt trade flows, increasing costs for shippers and consumers alike.

• Labor Uncertainty: Ongoing East and Gulf Coast port labor negotiations pose risks of delays, diverted cargo, and higher prices.

(5) Sundial Foods: A Promising Plant-Based Startup Bows Out

California-based Sundial Foods has officially closed its doors, but its innovative intellectual property (IP) has found a new home with an undisclosed European food giant. The startup, known for its plant-based chicken wings and cutting-edge protein-structuring technology, dissolved its operations on December 19, 2024, according to filings with the California Secretary of State.

A Brief Journey of Innovation

Founded in 2019 by Jessica Schwabach (CEO) and Dr. Siwen Deng (CTO), Sundial Foods began as a project at UC Berkeley’s Alternative Meats program. The company aimed to revolutionize plant-based proteins by creating meat alternatives with improved texture and sensory experience.

After participating in Nestlé’s R&D Accelerator program in 2020, Sundial secured a $4 million seed round led by the food giant in 2021. Its flagship product, plant-based chicken wings, debuted in select New York and San Francisco restaurants in 2022, gaining attention for their innovative design. Made from chickpeas, sunflower oil, and nutritional yeast, the wings featured a crispy, edible skin that retained moisture, mimicking the texture of traditional chicken wings.

The challenges of scaling

Despite early success, Sundial struggled to navigate the tough venture capital environment. CEO Jessica Schwabach acknowledged the difficulties of scaling independently as a venture-backed startup. “While we strongly believed in the mission, we realized that partnering with a larger food company was the best path forward,” Schwabach said.

The sale of Sundial’s IP to a well-resourced company with established distribution networks provides a new opportunity for its technology to reach broader markets.

What’s next for Sundial’s innovations?

The transfer of Sundial’s IP underscores the growing demand for advanced plant-based protein technologies. With its new owner, the technology may see mass production and greater global distribution, potentially accelerating the adoption of plant-based alternatives in markets where demand continues to rise.