USDA raises soybean oil biofuel demand, signaling tighter feedstock markets

USDA on June 11 raised its 2025-26 soybean-oil use for biofuel production to 14.55 billion pounds from 14.2 billion pounds, while leaving the 2026-27 forecast at 17.8 billion pounds. The unchanged outlook for next marketing year still pointed to a 3.6 billion-pound jump from 2025-26, a signal that soybean oil will remain a heavily pulled feedstock across renewable diesel and biodiesel.

The June WASDE said the stronger soybean-oil demand was supported by the U.S. Environmental Protection Agency’s Renewable Volume Obligations for 2026 and 2027, which were finalized in April 2026. EPA said meeting those volumes will require biodiesel and renewable diesel production and use to rise by more than 60% versus 2025 volumes, a policy push that should keep pressure on vegetable-oil markets and reinforce the value of domestic soy crush.

USDA also lifted its 2025-26 soybean crush forecast, citing higher soybean-meal exports and stronger domestic disappearance. At the same time, it raised soybean-oil use for biofuel and lowered soybean-oil exports, a combination that underscores how the oilseed balance sheet is being reshaped by fuel demand rather than just food and export flows. For biodiesel and renewable diesel producers, that usually means tighter competition for soybean oil against other vegetable oils and potentially firmer input costs.

The revision matters because it came alongside a broader policy backdrop that is still working through 45Z guidance, RFS volumes and carbon-intensity scoring, all of which affect feedstock selection and plant economics. USDA’s own Economic Research Service had already pointed in the same direction in its May Oil Crops Outlook, forecasting soybean-oil use for biomass-based diesel production at 17.8 billion pounds in 2026-27 and saying U.S. soybean crush could reach a record 2.75 billion bushels on favorable crush margins and strong feedstock demand.

The June 2026 reset was also notable against last year’s view. USDA’s June 2025 WASDE had kept 2025-26 soybean-oil use for biofuel unchanged at 13.9 billion pounds, so the latest update marked a clear upward revision in how much soybean oil the domestic market may need to supply. That supports processor utilization and crush margins, but it also raises the odds of firmer basis levels and more expensive oil purchases downstream if renewable fuel output keeps expanding.