One Agriculture Company That Will Profit From Turning Jet Fuel “Green”

green-leafed plants

Image Source: Unsplash

When you think of how airplanes work, you probably don’t picture fields of corn. But farmers could soon be producing the ingredients for jet fuel. And it’s because of the Inflation Reduction Act.

The government wants the airline industry to use more SAF – sustainable aviation fuel. That’s jet fuel produced from renewable sources such as vegetable oil, beef tallow, used cooking oil, and other waste that would normally be thrown away.

But the most important way to produce SAF is by using ethanol. That’s the alcohol in beer and wine. And most ethanol is produced from corn. Without ethanol, there’s no way to produce enough SAF to meet the government’s goals.

According to President Biden, “In the next 20 years, farmers are going to be providing 95% of all the sustainable airline fuel.” And companies are already starting to cash in on this trend. Last month, LanzaJet opened the world’s first ethanol-to-SAF plant.

We’re focused on finding the safest income investments on the market. When the government passes new laws and regulations, we pay attention and look for ways to profit from the new trends it creates.

Today, I’ll show you how government policies will drive up demand for ethanol in the coming years. I’ll also give you one way to profit from this trend while collecting a reliable yield.

Sustainable Fuel Is on the Rise

The airline industry has faced difficulties in reducing carbon emissions. You can’t fly a plane with a battery. It’s too big and too heavy. They can try to be more efficient, but at the end of the day, airplanes still have to burn jet fuel.

That’s why there’s a push for SAF. Planes can’t avoid jet fuel. But they can make sure it comes from renewable sources rather than from fossil fuels. But SAF is expensive to produce. And it costs airlines about 50% more to use SAF instead of regular jet fuel.

So to incentivize more companies to use it and kickstart the SAF industry, the Inflation Reduction Act introduced a new tax credit. Section 45Z of the law allows companies producing SAF to claim up to $1.75 for every gallon they make.

And many are trying to profit from this growing trend. According to the International Air Transport Association, nearly 500 million gallons of SAF is expected to be produced in 2024. That’s more than three times higher than last year.


But even with rapidly growing SAF production, that’s still just a drop in the bucket compared to the amount of jet fuel the airline industry uses every year – over 86 billion gallons.

So the SAF being produced right now is less than 0.6% of what airlines are using. That means there’s a lot of potential growth for this industry.

How to Profit From SAF Growth

The government hopes to increase America’s SAF production to 3 billion gallons by 2030 and 35 billion gallons by 2050. It takes about 1.7 gallons of ethanol to produce 1 gallon of SAF. So we’re going to need a lot more ethanol.

One way to profit from the SAF trend is by investing in Archer-Daniels-Midland (ADM). ADM helps farmers transport, process, and sell their crops. ADM has relationships with over 200,000 farmers around the world and is one of the major companies that processes corn and soybeans into oils, starches, animal feed, and ethanol.

In the U.S., ADM is one of the top three ethanol producers, capable of making 1.6 billion gallons each year. Most of the ethanol being produced today is blended into gasoline to reduce air pollution.

ADM’s earnings can change a lot from year to year depending on the price of commodities. But the company has paid a reliable growing dividend for 49 years and just raised it by 11%. That shows it has smart management and a strong financial position to keep rewarding shareholders for nearly half a century -- and should continue to do so, powered by SAF demand.

ADM yields 3.8% and trades at just 9x earnings. That’s a 40% discount from its historical average of 15x earnings. So now could be a good time to invest and profit from the growing demand for SAF.

More By This Author:

Return-To-Office Could Be A Profitable Opportunity Right Now
Companies Are Returning To U.S. Shores, Bringing Profits Back
Biden’s LNG Pause Can’t Stop You From Profiting From This Trend

Brad Thomas is the Editor of the Forbes Real Estate Investor.

Disclaimer: This article is intended to provide information to interested parties. ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.