When soybeans become fuel: how biodiesel reshapes U.S. soybean market — ASAP Agri
The 2025/26 season was widely expected to bring cheaper soybeans. Global supply has reached record levels, and the overall balance sheet looks relatively comfortable. Yet the market is telling a different story: CBOT soybean futures are currently trading about 20 USD/MT above last season’s average level, Victoria Blazhko, Head of Editorial, Content and Analytics at ASAP Agri, told Latifundist.com.
The first price rally emerged in autumn. In October, signals of renewed dialogue between China and the U.S. emerged, followed by a recovery in Chinese purchases of U.S. soybeans. Volumes were nowhere near the levels seen in calmer years. But for a market that had spent months under pressure from trade tensions between Washington and Beijing, the mere return of Chinese demand was enough to support prices.
The second impulse came during the winter, and it was no longer about China. By that point, the effect of renewed Chinese buying had largely faded. Instead, attention shifted to soybean oil, which started to rally on expectations of stronger demand from the biodiesel sector.
By late winter, another factor entered the picture: crude oil. As energy markets moved higher amid escalating tensions in the Middle East, the connection became even clearer.
Higher oil prices improve the economics of biodiesel. Biodiesel supports soybean oil prices. And soybean oil, in turn, supports soybean futures.
In other words, the soybean market in the 2025/26 season is no longer just a story about Chinese demand for U.S. beans. Another demand center is emerging — the energy sector.
U.S. biodiesel boom rewrites soybean market
In the U.S., the biofuel sector has become the main driver of soybean oil demand. According to USDA projections, industrial use of soybean oil — primarily for biodiesel and renewable diesel production — could reach 6.35 MMT in 2025/26, up from 5.33 MMT in 2024/25.
For comparison, the figure stood at just 4.05 MMT in 2020/21. In other words, demand has increased by more than 2.3 MMT in five years.
The key catalyst has been government policy. In the U.S., the biofuel market is regulated by the Environmental Protection Agency (EPA) through the Renewable Fuel Standard (RFS) — a federal program that sets mandatory volumes of biofuels blended into the transportation fuel pool.
In June 2025, the EPA released a proposal for new Renewable Volume Obligations (RVO) — annual mandates that set how much biofuel must be blended into the U.S. fuel supply under the RFS —for 2026–2027. Under the proposal, total biofuel volumes would rise to 24.02 BLN GAL in 2026 and 24.46 BLN GAL in 2027, compared with 22.33 BLN GAL in 2025.
Compliance with these mandates under the RFS is tracked through Renewable Identification Numbers (RINs) — tradable credits issued to biofuel producers. Oil refiners purchase these credits to meet the required share of biofuels in the fuel mix.
For the biomass-based diesel (BBD) segment — including biodiesel and renewable diesel — the proposal sets 7.12 BLN RIN credits for 2026, equivalent to roughly 5.6 BLN GAL of biofuel, compared with 3.35 BLN GAL in 2025.
At the same time, the EPA has been considering changes to the RIN allocation system. The proposal suggested that biofuels produced from imported feedstocks would receive only half the RIN credits compared with fuels made from domestic feedstocks — the so-called half-RIN mechanism. The idea was simple: strengthen support for domestic raw materials, particularly soybean oil.
As of 12 March 2026, both the new quotas and potential RIN changes remain under review. On 26 February, the EPA submitted a revised version of the June proposal to the White House, where it entered evaluation by the Office of Management and Budget. A final decision is expected by the end of March.
The final BBD quota level has not yet been disclosed, with industry sources suggesting it may reach around 5.2–5.6 BLN GAL — slightly below initial expectations but still implying stronger demand for biodiesel feedstocks such as soybean oil. Industry groups, including Clean Fuels Alliance America, support a level of around 5.25 BLN GAL, while the half-RIN mechanism may be softened in the final rule.
Expectations of expanding biofuel mandates have already affected the market. According to USDA estimates, the biofuel sector could consume more than half of all soybean oil produced in the U.S. in the 2025/26 season. This has been one of the key factors supporting soybean oil prices in recent months and has stimulated higher soybean crushing.
Additional support for the sector comes from the Clean Fuel Production Credit (45Z), introduced on 1 January 2025. The credit rewards producers based on fuel carbon intensity, offering up to 0.75 USD/GAL for biodiesel and renewable diesel, and up to 1 USD/GAL for sustainable aviation fuel.
The program replaced the previous Blender’s Tax Credit and is designed to stimulate production of low-carbon fuels. The lower the emissions associated with production, the higher the credit received. Because vegetable oils such as soybean oil have relatively low carbon intensity, the policy further strengthens their position as biofuel feedstocks.
The rollout of the program, however, was far from smooth. Although the credit took effect in early 2025, detailed implementation rules were released only in February 2026. Until then, producers faced significant uncertainty over emissions calculations, feedstock eligibility, and registration procedures.
As a result, many biofuel producers — especially smaller biodiesel plants — reduced or temporarily halted production during 2025 while waiting for clearer guidance.
Once the rules were clarified in February, soybean oil prices began to recover, providing additional support to soybean futures. At the same time, the credit has been extended through 31 December 2029, reinforcing longer-term policy support for low-carbon fuel production.
Thus, today, the U.S. offers perhaps the clearest example of how biodiesel is transforming soybean oil — and, by extension, soybeans — from a traditional food product into a strategic energy feedstock. This shift has already become a key factor supporting soybean futures this year.
But for the global market, another question is just as important: how the same trend is reshaping supply dynamics in South America, the region that produces the bulk of the world’s soybeans and soybean oil.
