NASHVILLE, TN – Uncertainty surrounding federal biofuel policy is shaping the expansion of renewable diesel and soybean demand, according to Terrain economist Bree Baatz, with major implications for crush margins and farm-level pricing opportunities.
Renewable diesel has become a major driver of U.S. soybean oil demand because it can directly replace petroleum diesel without blending, but production fell sharply in 2025 as shifting tax credit rules and unclear federal guidance disrupted plant operations and feedstock demand. Baatz notes that the transition from blender to producer tax credits, along with unresolved questions about eligibility, slowed investment and left capacity underutilized.
For producers, feedstock competition remains a key issue. Renewable diesel can be made from soyoil, canola oil, corn oil, tallow, and used cooking oil, with lower-carbon imported fats often favored due to better credit economics and port-based plant logistics. Baatz estimates soybeans have lost roughly 375 million bushels of demand over the past three crop years as market share shifted toward substitutes.
Regionally, state-level policies continue shaping demand. California’s Low Carbon Fuel Standard remains the dominant force, though its carbon-scoring structure and limits on vegetable-oil feedstocks could cap soyoil’s growth even as federal incentives improve. The result, Baatz says, is a market both supported and constrained by policy.
Looking ahead, Baatz expects stronger crush demand later in 2026 if federal and state rules align, potentially tightening basis and improving pricing flexibility for farmers located near crush and renewable diesel facilities.
Farm-Level Takeaway: Policy clarity will determine soybean crush demand trajectory.