After a slow year, the biodiesel sector is now facing record US biofuel goals.
In spite of the fact that it is still recovering from a difficult year, the U.S. Biodiesel Industry will find it hard to ramp up production quickly enough in order to meet one of the most ambitious mandates for biofuel blends ever set by Environmental Protection Agency. The EPA's ambitious?biofuel goals were set in late March, as fuel prices soared during the U.S./Israeli war against Iran. Companies that convert soybeans into biodiesel must increase production by 60% to meet the record goal. Biofuel experts and industry groups doubt that they will be successful, but failure could fuel the increase in diesel prices. Farmer and agricultural groups have lobbied Washington for years to increase biofuel mandates. U.S. soybean exports dropped last year as China switched from U.S. crops to Latin American ones in response to Donald Trump's threats. Trump's Republican Party and Trump prize farmers as a political constituency in their fight to maintain a thin majority in Congress during the November midterm elections.
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"
The EPA estimates that to meet the new obligations, a supply of 6,07?billion gallons will be needed this year. This figure is higher than the mandates, because some biofuels produced in the United States are exported or don't earn 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 (also known as RINs) from those who do.
Refiners and other obligated party will be forced to use credits previously generated - known as the RIN Bank in the industry - to meet the EPA quotas. This could increase their prices. These higher compliance costs can be passed on to consumers at the pump.
Scott Irwin is a well-known agricultural economist and expert in biofuels at the University of Illinois. He estimates that obligated party must generate 915 millions credits each month to meet EPA mandates. According to the most recent EPA data, the credits generated by biodiesel (D4) blending increased to 651 millions in March. This is up from 481 in the previous month.
"We're not even close to meeting our needs." Irwin stated that it is obvious we are headed for a large deficit and will continue to build a deficit into 2027.
The?U.S. The?U.S.
The industry scrambles to increase output
Executives in the industry say that they are scrambling for ways to increase output.
The biodiesel sector is worried about how it will meet this challenge. It is always difficult to coordinate feedstock supplies and get fuel to the market. It is possible, but you have to get these supply chains to work together.
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?didn't respond to requests for comments.
MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWEST MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTEN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTERN MIDWESTEAN PRODUCERS SAY: "WE ARE READY"
In the past, low demand for biodiesel or renewable diesel forced many producers either to shut down their plants or operate them at a much lower capacity. The challenge now is to bring them online at maximum capacity. After the EPA announcement, Iowa Renewable Fuels Association executive director Monte Shaw said that plants in Iowa, which account for more than 23 percent of U.S. Biodiesel production earlier this year, are ramping up 'as quickly as possible' to run at maximum capacity.
He warned, however, it would be difficult to reach the combined annual production of the state, which is?400,000,000 barrels, without clarity from the Trump administration about how producers can obtain 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 after the EPA announcement. The facility is ramping up to 35 million gallons this year from 25 million in 2025.
Jeramie Welker, general manager at?Minnesota Soybean Processors said: "The demand is huge... and we are ready."
The processors claim that running at full capacity will be possible in time. However, expanding beyond this is difficult because steel and aluminum tariffs are driving up construction costs and there remain logistical and labour bottlenecks. According to EIA, as of January 1, 2026 the U.S. has 1.96 billion gallons?of operable biodiesel and 4.89 billion?gallons?of operable capacity?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.
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 noted that the industry may need to increase capacity by 2027. Winters added that the EPA mandates provide the industry with a powerful incentive to grow. The market opportunity is enormous. (Reporting from Siddharth Cavale in New York, and Jarrett Renshaw Washington; Additional reporting from Karl Plume in Chicago. Editing by David Gregorio).
(source: Reuters)
