US soybean oil prices rise to highest level since 2022 after biofuel targets updated

The US biodiesel industry continues to recover from a difficult year, and could face challenges meeting the most ambitious biofuel blending requirements ever. Amid rising energy prices caused by the Iran war, the Environmental Protection Agency in late March set new targets that would require producers to increase output by more than 60% to meet them.

Thus, the production of biodiesel and renewable diesel is planned to increase from 3.35 billion gallons in 2025 to 5.4 billion gallons in 2026 and 5.7 billion in 2027. At the same time, according to the regulator’s estimates, the actual supply should reach 6.07 billion gallons, since some biofuels are exported or do not generate offset credits. Under the Renewable Fuel Standard, refiners must either blend biofuels or purchase special credits (RINs), which creates additional financial pressure.

But experts doubt the industry will be able to ramp up production quickly enough to meet the requirements, as it would need to generate about 915 million credits per month, a figure that is significantly lower than current levels. Failure to meet the targets could lead to a credit shortage and higher diesel prices for consumers.

Meanwhile, producers are actively restarting production. In the Midwest, plants that were previously operating at less than full capacity are increasing volumes. Plants in Iowa have reached maximum capacity, and in Minnesota, Minnesota Soybean Processors has restarted a previously shut-down plant and plans to increase production to 35 million gallons by the end of the year.

At the same time, the high cost of building new plants, labor shortages, and logistical difficulties are hindering the expansion of production. Experts note that to meet the goals, it is necessary to load existing capacities by 85–90% while investing in new ones, which will be a serious challenge for the US biofuel sector.

Recall that from 2025 the US has imposed restrictions on the use of imported oils for biofuel production, providing only 50% of subsidies for biofuels from imported oils. This decision, against the background of a shortage of domestic supply, leads to an increase in soybean oil prices in the country.

May soybean oil futures on the Chicago SWOT rose 5.2% over the week to the highest level since spring 2022 of $1,656/t (+7.7% month-on-month, +57% year-on-year) following an increase in oil prices.

Despite increasing demand, soybean oil inventories in the US continue to grow due to increased soybean processing.

At the same time, soybean oil from Brazil and Argentina is currently being offered at $1,100-1,200/t FOB for delivery in May-June, and the discount compared to prices in Chicago has already grown to $450-500/t.