US soybean oil prices stall amid biofuel policy, 45Z uncertainty: 2026 preview

Fastmarkets01-16

Heading into 2026, trading sources are hopeful for policy clarity in the first quarter of the new year, which should underpin both demand and prices for US edible oils, Fastmarkets heard Move from BTC...

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Growth in domestic renewable fuel output lost steam in 2025 as producers faced increased feedstock costs, poor margins and regulatory uncertainty. This caused biofuel operators to slow or reduce output altogether during the year.\nThe industry was left with more questions than answers when the US transitioned from the Blenders Tax Credit (BTC) to the 45Z Clean Fuel Production Tax Credit (CFPC) on January 1, 2025.\nThe BTC provided a flat $1-per-gallon credit for biofuel blenders. In contrast, 45Z is a performance-based credit that offers up to $1 per gallon depending on the carbon intensity (CI) score. Lower CI feedstocks produce lower CI fuel, generating a larger credit, but the treatment of foreign-sourced feedstocks under the credit was unclear.\nIn July 2025, US President Donald Trump signed a broad legislation known as the One Big Beautiful Bill Act (OBBB) that made key updates to 45Z — extending the credit by two years through the end of 2029 and limiting eligibility to biofuels produced only in the US, Mexico and Canada.\nLanguage within OBBB also removed indirect land-use change (ILUC) scoring, allowing soybean oil to qualify for nearly the same level of tax credits as lower-carbon feedstocks like tallow and used cooking oil and allowed full credit transferability.\nTransferability of the 45Z credit allows one entity to move credits to another for cash, enabling companies to receive the value of the credit beyond their current tax liability.\nIn December, legislators introduced a bill proposing to reinstate the BTC for a six-month period through May 31, 2026. The measure was a result of increased pressure on blending economics following the expiration of the BTC, according to market sources.The bill would allow taxpayers to claim either the reinstated BTC or the 45Z credit, but not both, providing a bridge until Treasury finalizes operational guidance for 45Z.\nPolicy delays heighten demand uncertainty\nDespite poor margins and robust US soybean crush levels, soybean oil futures and cash prices were supported briefly at mid-year 2025 after the US Environmental Protection Agency (EPA) proposed stronger-than-expected Renewable Volume Obligations (RVOs) for 2026-2027.\nThe EPA suggested a 2026 mandate of 5.61 billion gallons of biomass-based diesel and a 2027 mandate of 5.86 billion gallons, up from 3.35 billion gallons in 2025.\nSoybean oil prices rose because the increased RVOs would mean higher demand for feedstock, including soybean oil, to produce biomass-based diesel.\nWhile the market had hoped for final RVOs to be published before the end of 2025, the EPA said in a December 15 court filing it expected to complete and issue 2026-2027 biofuel blending requirements sometime in the first quarter of 2026.\nImpact of small refinery exemptions\nThe EPA said part of the reason for the delay in finalizing the RVOs was due to the agency’s supplemental proposal issued in September on another longstanding market issue — Small Refinery Exemptions (SREs).\nEach year, oil refiners must blend billions of gallons of biofuel into the US fuel mix or purchase Renewable Identification Numbers (RINs) from other blenders or producers. But the EPA can grant exemptions to small refiners that can prove compliance with the program, including the purchase of RINs, has caused them financial hardship.\nMarket participants warned that sizeable exemptions could retroactively weaken the proposed RVOs, undermine past blending mandates and potentially reduce overall demand for renewable fuels and the feedstocks used to produce them.\nIn September, the agency cleared a backlog of petitions, exempting approximately 740 million RINs for 2023 and later compliance years. Based on a conversion factor of roughly 1.5 RINs per gallon of biomass-based diesel, this represented around 493 million gallons of renewable fuel.\nAdditional volumes were exempted by the EPA in the fourth quarter of 2025.\nThe EPA outlined two options for reassigning or reallocating the exempted volumes from smaller refiners to larger ones — partial reallocation (50%) or full reallocation (100%). The EPA also received public input on other reallocation levels.\nMarket participants’ expectations\nSoybean oil futures across the 2026 curve have been rangebound between 48.00-52.00 cents per lb in the last quarter of 2025 and will remain in that range until the market gets the policy updates it needs, trading sources told Fastmarkets.\nMarket sources said that without clarity on 45Z and final RVOs, soybean oil demand from the domestic biofuel sector is unlikely to accelerate much. Both US soybean crush and biofuel margins depend on the final RVOs from the EPA.\n“We’re heading into year-end with major biofuel policy changes looming and 2026 rules still undefined, leaving renewable producers hesitant to make forward purchases,” analyst Susan Stroud wrote in a December 15 research note to clients.\n“The key difference versus last year is that producers were using as much soybean oil as possible, knowing the $1-per-gallon blending tax credit — regardless of feedstock or carbon intensity — would expire at the end of 2024. Today, it’s the opposite. Cash [soybean oil] is weak, buying is largely hand-to-mouth and palm oil trading at a discount to US soybean oil is capping export demand,” she added.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.36.0","shortVersion":"4.36.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2603609967","isCrawlerRequest":true}