ADM, Bunge plunge as proposed law overhaul could bring slower biodiesel growth

Archer Daniels Midland (NYSE:ADM) -5.6% and Bunge (NYSE:BG) -6.2% after the Biden administration released a proposal Thursday that would bring sweeping changes to the U.S. biofuel mandate, including a plan to encourage use of renewable natural gas to power electric vehicles.

The Environmental Protection Agency's proposal could prompt an overhaul that shifts the program's focus away from gasoline, diesel and other liquid fuels to a broader plan aimed at decarbonizing transportation.

The EPA said it is proposing new regulations governing the generation of renewable electricity made from biomass that is used for transportation fuel in electric vehicles, and will seek comment "on this new component of the RFS program that would tie electricity generation from renewable biomass into the program for the first time."

The agency also wants public comment on how its plan would affect the "continued viability of domestic oil refining assets, including merchant refiners" with limited blending facilities that cannot easily generate compliance credits, as well as "how best to support novel fuels like sustainable aviation fuels and clean hydrogen, and how to account for the new and updated incentives in the Inflation Reduction Act."

The proposal calls for overall blending mandates of 20.82B gallons in 2023, 21.87B gallons in 2024 and 22.68B gallons in 2025, with volumes of conventional biofuels such as corn-based ethanol set at 15B gallons or higher in 2024 and 2025.

Archer Daniels Midland (ADM) "does not seem to be overvalued by most metrics and could prove to be a good inflation hedge," Giesbers Investment Strategy writes in an analysis newly published on Seeking Alpha.