Soybean Oil’s Biofuel Share Faces Growing Pressure

U.S. imports of foreign feedstocks are challenging soybean oil use in renewable fuel production and growth. In November, soybean oil used in biofuel production totaled 1.192 billion pounds, according to data from the Energy Information Administration. 

Renewable diesel accounted for about 39.2 percent of soybean oil biofuel usage or 467 million pounds. Volumes peaked in June at 689 million pounds, showing considerable growth. However, growth has not been the case since the summer peak. 

November’s renewable diesel production using soybean oil was up about four percent year-over-year. Meanwhile, soybean oil used in biodiesel production was up 18 percent. Biodiesel production growth appeared to stall over the past few years but has seen a larger push ahead of the expiration of the blenders tax credit that expired at the end of last year. 

Increased imports of foreign feedstocks such as used cooking oil (UCO) and beef tallow have led to lower overall usage of soybean oil in biofuel production. UCO used in biofuel production totaled 543 million pounds in November. Year-to-date usage totaled 6.85 billion pounds, up 11 percent year-over-year. Year-to-date tallow usage was up 87 percent at 6.46 billion pounds. 

Soybean oil in renewable fuel production rose only 2.2 percent so far this year. Slower gains were also made for canola and corn oil. The U.S. imported record volumes of UCO, beef tallow, and canola oil last year. Import growth was led by renewable fuel producers taking advantage of biofuel tax credits, which favored feedstocks with lower carbon intensity scores over soybean oil.

Heightened use of foreign feedstocks drove the share of soybean oil in biofuel production to an average of 35 percent last year. That compared to an average of 41 percent in 2023 and 47 percent in 2022. 

The current trend of producers favoring UCO over soybean oil may not continue due to the expiration of the biofuel tax credit. A lack of guidance has sidelined renewable fuel producers. UCO prices have continued to climb over the past month despite President Trump freezing federal spending on programs in the Inflation Reduction Act. 

The U.S. Treasury Department’s recent proposal that could set restrictions on UCO imports also supported prices as renewable fuel companies race to secure supplies ahead of a potential ban.

Overall strength in the vegetable oil markets could continue to support soybean oil. U.S. soybean oil inventories are at multi-year lows despite record domestic crush, which has been underlined by strong biofuel and export demand.