Bunge, CoverCress sign deal to meet growing lower CI renewable fuel feedstock demand

Bunge, the world's largest oil seed processor, and start-up agricultural firm CoverCress have signed a deal to increase volumes of renewable fuel feedstock produced from oil seeds and animal feed, while lowering the carbon intensity of the fuel produced and enhancing Bunge's joint-venture supply agreement with Chevron, Bunge said April 27.

"Expanding the support for this new winter oilseed crop is an ideal way to produce a lower carbon intensity feedstock that can help meet the growing demand for renewable fuels," said Bunge CEO Greg Heckman on its April 27 results call. "We believe rotational cover crops can play a key role in our joint venture with Chevron to supply inputs to the renewable fuels industry."

CoverCress has developed a process to convert pennycress, a winter annual weed, into a cover crop that fits in with existing corn and soybean planting rotations, allowing farmers to add a new winter rotation crop, and creating a farm-to-fuel supply chain for low carbon intensity (CI) oil feedstock produced from CoverCress seed as well as whole grain animal feed.

Both Bunge and Chevron have acquired stakes in CoverCress. Under the contract, CoverCress will supply Bunge with CoverCress grain produced by farmers for use as feedstock.

"This is a great extra source of revenue for producers when we're able to activate it," Heckman said. "And this goes as planned will be a very low CI score and great -- another great source of feedstock."

Earlier this year, Bunge and Chevron agreed to join forces to a create renewable feedstocks joint venture, with Bunge contributing two soybean processing plants, in Destrehan, Louisiana, and Cairo, Illinois, and Chevron contributing $600 million as well as its transportation and logistics expertise. The project will almost double the capacity of the two plants from the current 7,000 mt/d by the end of 2024.

Bunge will operate the plants and Chevron will have purchase rights of the renewable oil for use in their production of transportation fuels.

Chevron has a previously stated objective of producing 100,000 b/d of sustainable aviation fuel and renewable diesel by 2030 to supply its extensive transportation fuels system.

Demand for lower CI feedstock grows as new projects come online

Demand for renewable fuel feedstock is growing as more projects are announced and come online. Marathon expects to start-up its Martinez, California, renewable fuels facility in 2022, and ramp up to full capacity of 730 million gal/yr in 2023. Phillips 66's Rodeo Renewed project – which involves conversion of a California refinery to a renewable fuels facility – is expected to come online in 2024.

This increased renewable production has lowered the price of California's Low Carbon Fuel Standards, which are given to renewable fuel producers and figure heavily in plant economics. So far in the second quarter, the average price in $117.73/mt, down from the $138.94/mt in Q1.

However, by using a lower carbon intensity fuel like one developed by CoverCress, increases the value of the LCFS.

No timeline was given as to when CoverCress crops would produced on a commercial scale, with Heckman saying "it's out into the future before any meaningful contribution."

This includes "farmer adoption" of CoverCress and when it would be processed in Bunge's plants, Bunge CFO John Neppl said on the call.

"I would just add that we've got planned projects in place today that have been approved and underway to be able to accommodate processing CoverCress at our selected facilities, especially those related to the Chevron JV," Neppl said, not providing further details.