US plans to increase renewable fuel production to record levels

The US Environmental Protection Agency (EPA) projects that under the Renewable Fuel Volume Obligation (RVO) program, biomass-based biodiesel production will increase from 11 million tons in 2026 to 17.9 million tons in 2027, and to 18.9 million tons in 2027.

 

Recall that biomass-based biofuels are produced from vegetable oils (soybean and canola), animal fats, and processed vegetable oil. They have been included in the RFS since 2007. The first RVO program in 2009 was 0.5 billion gallons, and by 2025 the volume has grown to 3.35 billion gallons.

 

From 2012 to 2020, the volume of soybean processing for biofuel in the United States was about 1 billion gallons per year, but since 2021, increased demand has led to an increase in processing capacity and rising prices for soybean oil.

 

After the EPA's first proposal for 2026-2027, which significantly exceeded industry needs, soybean oil futures rose 18% in two days, but subsequent delays in approval and the Trump administration's rollback of a number of clean energy programs led to a 10% drop in prices by early 2026.

 

But amid growing farmer discontent and a sharp rise in energy prices due to the war with Iran, the EPA was forced to accelerate the final decision, which also allows for a full tax deduction for imported raw materials, including waste oil from China, until 2028.

 

According to the USDA forecast dated March 31, soybean acreage in the United States in 2026 will grow by 4% compared to the previous year to 84.7 million acres, and soybean exports to China in the next three seasons will be inferior to the 5-year average (25 million tons).

Producers are expected to increase soybean acreage amid increasing domestic demand for biofuels, as was the case during the corn market's adaptation to ethanol production in the 2000s.