US biofuels feedstock markets rebound after renewable fuel policy finalization

Soybean oil, used cooking oil and tallow are gaining as plants chase better renewable diesel and biodiesel utilization after March RFS finalization restored momentum across U.S. biofuels feedstock chains. EPA's 2026-2027 rulemaking and imported-feedstock credits are now redrawing the margin map.

Policy reset reshapes the buying curve

EPA's final Renewable Fuel Standard rule for 2023, 2024 and 2025 was published in December 2022, and the agency's 2026-and-2027 rulemaking appeared in the Federal Register on June 17, 2025. In June 2025, EPA proposed higher biofuel blending volumes through 2027 and would allow credits generated through imported feedstocks. The sequence shifted the market from waiting on rules to pricing actual compliance pathways.

The policy finalization followed a prolonged period of underutilization across the biofuels industry. In market terms, that means producers are no longer just weighing whether plants exist, but whether they can run them at rates that support margins. When compliance demand firms up, the value of every lipid input rises or falls with it, from soy oil to waste oils and animal fats.

Soybean oil has the broadest demand lift

In July 2025, USDA projected that biofuel demand would soak up more than half of U.S. soybean oil production next year. It has become a central demand sink for refiners making renewable diesel and biodiesel, and the policy reset gives that pull more staying power.

The flip side is pressure on domestic supply. The American Soybean Association has argued that increased feedstock imports push soy away from domestic biofuels markets, a line that becomes sharper if imported feedstock credits remain in the policy mix. For crushers, merchandisers and biorefineries, the soybean oil market is now being set by compliance demand as much as by food and export channels.

Used cooking oil and tallow remain the tightest pools

Used cooking oil has already shown how quickly a domestic feedstock can run short. In April 2021, Valero said UCO was nearly "tapped out" in the United States, a warning that still frames procurement today. In August 2024, EPA was auditing biofuel producers' used cooking oil supply, which put extra attention on traceability and sourcing.

Animal fats and oils have moved with the same policy-driven pull. Improving renewable diesel and biodiesel economics drove stronger demand for animal fats and oils, while U.S. biofuel inputs hit multiyear highs on war and policy. That combination leaves tallow and other lower-carbon lipid streams with strong pricing support, but limited room to scale without displacing other uses or reaching into imports.

Imports are becoming part of the compliance equation

Stillwater Associates said imported feedstocks are necessary for RFS compliance and for fully utilizing domestic manufacturing capacity. That view sits directly against the American Soybean Association's warning that more imports can pull soy away from domestic biofuels markets. The debate is no longer theoretical, because EPA's June 2025 proposal would allow credits generated through imported feedstocks.

In January 2026, the U.S. was expected to finalize 2026 biofuel quotas by early March and drop import penalties. If that timing holds, imported fats and oils become a more workable part of the supply stack just as domestic supplies remain tight. For traders and producers, that means the spread between domestic soybean oil, UCO, tallow and inbound material can move faster than the underlying plant economics.

Capacity is still coming, but utilization is the test

Argus projected in its June 2024 renewable diesel webinar that U.S. production capacity could more-than-double by the end of 2027. Feedstock contracting has become more strategic: a bigger plant fleet only matters if feedstock can be sourced at workable margins and acceptable carbon intensity. A June 2024 farmdoc handout on renewable diesel and FAME biodiesel also showed how U.S. biofuels now span separate fuel streams, including renewable diesel, biodiesel and SAF, each with different feedstock needs.