U.S. biofuel production faced a significant slowdown in February, with biomass-based diesel and biodiesel output hitting multi-year lows amid ongoing uncertainty around biofuel tax credits. Renewable jet fuel production also dipped but remains stronger than a year ago, reflecting growing airline interest in sustainable fuels. 

Ethanol production started the year strong, supported by firm international demand, although February exports declined. Feedstock usage dropped sharply, with soybean oil and used cooking oil usage hitting multi-year lows, while beef tallow’s share rose. Import volumes of key feedstocks also fell, reflecting weaker demand and policy-related headwinds.

Biomass-Based Diesel

Biomass-based renewable diesel production totaled 112 million gallons in February, down 36% from the previous month, according to data from the Environmental Protection Agency. That was the lowest monthly print since February 2023, as uncertainty concerning biofuel tax credits challenged production. 

Biodiesel production fell 43% to 38 million gallons, the lowest volume in over four years. Total biomass-based diesel production has been heavily challenged since the expiration of biofuel tax credits at the end of December. 

Renewable jet fuel production fell 55% in February to 3.8 million gallons but remained relatively strong compared to the past year. The drop-in alternative to petroleum-based jet fuel has seen substantial growth since the renewable diesel boom, primarily in 2024.

Ethanol

U.S. ethanol production totaled 1.411 billion gallons in January, down 3% from the previous month but up 9.5% from January 2023, according to data from the EIA. Output is off to a strong start after concluding 2024 production 3.8% higher than the previous year. Strong international demand for U.S. exports has kept ethanol processors optimistic despite declining margins.

Monthly data from the U.S. Census Bureau showed February exports fell 30% from the previous month to 139 million gallons. Volumes were unchanged compared to year-ago levels. Canada accounted for more than half of the shipments and was the No. 1 importer for the 47th consecutive month, driven by the country’s biofuel policies and strong demand.

Exports to Canada fell 6% to 50.8 million gallons. Volumes to the European Union fell to a four-month low of 17.6 million gallons. Exports to Mexico rebounded sharply by 39% to 11 million gallons. 

Carbon emissions policies in countries like Canada have boosted demand for U.S. ethanol. Green policies in the European Union have led to increased exports. Central and South America have also been major growth areas for the U.S. ethanol market.

Feedstock Usage

Feedstocks used for biofuel production totaled 2.346 billion pounds in January, down 28% from the previous year, according to EIA data. Canola oil usage fell 63% as imports from Canada fell sharply during the month. Corn oil usage rose from December. 

UCO usage in biofuel production totaled 399 million pounds, down 26% from the previous month and the lowest monthly print since March 2022. Beef tallow usage rose slightly from December to 710 million pounds. Beef tallow as a total percentage of feedstock usage jumped to 30% due to the drop in usage of other feedstocks. 

Soybean oil used for biofuel consumption fell 40% to 654 million pounds, the lowest since February 2021, according to data from the EIA. The share of soybean oil used in renewable diesel production rose to 41% due to the steep drop in biodiesel output. Soybean oil accounted for just 28% of total feedstock usage in renewable fuel production, maintaining an overall downtrend since reaching a peak in 2022. 

Increased imports of foreign feedstocks such as UCO and beef tallow have led to lower overall usage of soybean oil in biofuel production. Feedstocks dominate renewable fuel costs, accounting for the largest share of production expenses. That makes biofuel producers extra particular in feedstock sources to maximize margins as best they can. 

Biofuel Feedstock Imports

U.S. feedstock imports of canola oil, UCO, and beef tallow fell 27% in February to 902 million pounds, according to data from the U.S. Census Bureau. That was the lowest volume since July 2023 due to the expiration of key biofuel tax credits that favored foreign feedstock imports. 

Imports of canola oil fell 30% to 313 million pounds. UCO imports fell 25% to 455 million pounds. Beef tallow imports fell 25% to 133 million pounds. Imports from Australia, Canada, and Argentina rose during the month, while shipments declined from Uraguay and Brazil.

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Report #10