After a slow year, the biodiesel sector is now facing record US biofuel goals.
This year, the U.S. Biodiesel Industry, which is still recovering from a difficult year, will find it hard to ramp up production quickly enough to meet one of the most ambitious biofuel blend mandates ever set by the Environmental Protection Agency.
The EPA's ambitious biofuel goals were set in late March, as fuel prices soared during the U.S. - Israel war?on Iran. Companies that convert soybeans into biodiesel will need to increase production by over 60% this year in order to meet the record goal. Biofuel experts and industry groups doubt that they will be able to achieve their goal, but failure could fuel the increase in diesel prices.
Farmers and agricultural groups in Washington have been lobbying for higher biofuel mandates since the 1970s. U.S. soybean exports dropped last year as China switched from U.S. crops to Latin American ones in response to Trump's tariffs. Trump and the Republican Party are looking to farmers as a key constituency in their efforts to keep a slim majority in Congress during November's midterm election.
The EPA has set volume requirements for biodiesel, renewable diesel and other fuels of 5.4 billion gallons in 2026 and 5.7 million gallons in 2027. This is an increase from the 3.35 billion gallons last year.
"NOT AT ALL CLOSE TO WHATWE NEED"
According to EPA, meeting the new requirements will require a supply of 6,07 billion gallons in this year. This figure is higher than the mandates, because some biofuels produced domestically are exported or don't qualify for compliance credits.
The Renewable Fuel Standard requires refiners to either blend billions gallons of biofuels each year into the nation's gasoline supply or buy credits (known as RINs) from those who do.
Refiners and other obligated party will be forced to use credits previously generated - referred to in the industry by the RIN bank – to?comply to the EPA quotas. This could increase their prices. These higher compliance costs could be passed on to consumers at the pump.
Scott Irwin is an agricultural economist and biofuels expert at the University of Illinois. He estimates that obligated party must generate 915 millions credits per month in order to meet EPA mandates.
According to the most recent EPA data, the credits generated?from blending biodiesel with D4 rose from 481 to 651 millions in March.
"We're not even close to meeting our needs." Irwin stated that it'seems evident' that we are headed for big deficits, and a big deficit build up into 2027.
In its most recent Short-Term Energy Outlook report, the U.S. Energy Information Administration forecasts that in 2026 there will be a combined supply of 1.52 billion gallons biodiesel, and 3.53 billion gallons renewable diesel, which is below what was required by the EPA.
The industry scrambles to increase output
Executives in the industry say that they are scrambling for ways to increase output.
The biodiesel producers are concerned about the future of the industry. It is always difficult to coordinate the supply of feedstocks to get fuel to the market. This is according to Paul Winters, the director of federal communications and public affairs at the Clean Fuels Alliance of America.
American Fuel and Petrochemical Manufacturers, which represents refiners has stated that the EPA's target exceeds what domestic feedstock can support and will also increase compliance costs.
AFPM has not responded to?requests of comment.
MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWEST MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTEN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTEAN PRODUCERS SAY: "WE'RE READY".
In the past, producers were forced to shut down or operate plants at a low capacity due to a lack of demand for biodiesel. The challenge now is to bring them back up to full capacity.
According to Monte Shaw, Executive Director of the Iowa Renewable Fuels Association, Iowan plants, which were idle this year, are ramping up the fastest possible in order to reach full capacity after the EPA announcement.
He warned, however, it would be "difficult" to reach the combined state annual?production of 400 million barrels without clear guidance from the Trump Administration on how producers could secure clean fuel credits through a new 45Z program.
Shaw stated that "with one quarter of the calendar year already gone... this adds pressure."
Minnesota Soybean Processors, an integrated biodiesel and soy crushing company in the north, restarted their idled Brewster facility within a week of the EPA announcement. The facility will produce 35 million gallons this year, an increase from 25 million in 2025.
Jeramie Weller is the general manager at Minnesota Soybean Processors. He said, "The demand signals are big...and we're ready."
The processors claim that they can run at full capacity with time. However, expanding beyond this is difficult because steel and aluminum tariffs are driving up construction costs and there are still labor and logistical bottlenecks.
According to EIA, as of January 1, 2026 the U.S. has 1.96 billion gallons operable biodiesel and 4.89 billion for renewable diesel, other biofuels and sustainable aviation fuel. This is likely enough to meet 2026 quotas.
The actual production was a completely different story. In 2025, the combined output of biodiesel/renewable diesel would be just 2.9 billion gallons.
Traders and analysts predict that soybean stocks will tighten up by the fourth quarter, as biodiesel is expected to increase.
To meet the renewable volume obligation, we will need biodiesel as well as renewable diesel to run at 85-90% of capacity. Winters said that additional capacity will be needed for 2027. Winters said, "That's going to be a big challenge." (Reporting from Siddharth Cavale in New York, and Jarrett Renshaw at Washington; additional reporting from Karl Plume at Chicago; editing by David Gregorio).
(source: Reuters)
