Rewriting the RFS Playbook: The Impact of Final RVOs on Projected Biomass-Based Diesel Feedstock Use for 2026-2027

June 25, 2026

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by Todd Hubbs and Scott Irwin (Oklahoma State University/University of Illinois/farmdoc daily) The U.S. Environmental Protection Agency (EPA) finalized the “Set 2” rule at the end of March, establishing Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS) for 2026 and 2027 that are unprecedented in the history of the program (farmdoc daily, April 16, 2026). We have been working through the implications of these historic RVOs for the U.S. biomass-based diesel industry across a series of articles. Most recently, we translated the required pace of D4 RIN generation into the physical volumes of domestic biomass-based diesel production and imports needed to meet the final RVOs, and found that doing so would require domestic plants to run at very high rates of capacity utilization while relying on a recovery in imports that has yet to materialize (farmdoc daily, June 10, 2026). Standing behind every physical gallon of biomass-based diesel is a corresponding requirement for feedstock—soybean oil, distillers corn oil, animal fats, used cooking oil, and canola oil. The purpose of this article is to project the feedstock use implied by our biomass-based diesel production and import projections for 2026 and 2027, focusing on the split between domestic and imported feedstock and soybean oil use.

Analysis

We begin by recapping the production and import projections developed in our previous article from June 10th. That analysis fixes domestic FAME biodiesel and renewable diesel production at the level implied by an assumed rate of capacity utilization—90 percent of operable capacity in 2026 and 95 percent in 2027—and then solves for the imports required to close the remaining gap relative to the required level of D4 RIN generation.

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These are demanding annual figures relative to the recent pace of actual production.

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... imports have nearly stopped under the 45Z clean fuel production credit, for which non-North American imported biofuels are not eligible.

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A key question is how much of this feedstock will be sourced domestically and how much will be imported.

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Even though we assume a slightly higher domestic feedstock share than in 2024, imported feedstock use is still very large in both 2026 and 2027. There are two reasons. First, biomass-based diesel imports are large in both years—0.60 billion gallons in 2026 and 1.30 billion in 2027—and as noted above imported fuel is made entirely from imported feedstock. Second, a large share of domestic renewable diesel capacity is configured to run on imported feedstock.

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The final piece of the feedstock analysis is soybean oil, the single largest domestic feedstock for biomass-based diesel. Figure 4 splits the feedstock used in domestic biomass-based diesel production into soybean oil and all other feedstocks. We project soybean oil use at 37.5 percent of the total feedstock required for domestic production, the middle of the range for soybean oil in recent years (roughly 35 to 40 percent). On that basis, soybean oil use rises from 12.4 billion pounds in 2025 to 18.4 billion in 2026 and 19.4 billion in 2027. Use of this magnitude would absorb a sizable share of available domestic soybean oil supply and would have substantial implications for the soybean oil market and the broader fats and oils complex (Bukowski and Swearingen, 2026).

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Soybean oil usage for the calendar year calculated in this exercise should not be confused with the marketing year calculations produced in industry and by the USDA that run from October through September. Also, the 2026 total of 18.4 billion pounds of soybean oil feedstock suffers from the same slow start discussed in our previous article on biomass-based diesel production. EIA data through March indicates soybean oil usage for biofuels in the first quarter of 3.32 billion pounds, well below the pace needed to meet 18.4 billion pounds during the year. Subsequent data on biomass-based diesel production in April and May indicate similar soybean oil consumption to the level seen in March. In other words, the amount of soybean oil on a monthly basis, by our calculations around 1.79 billion pounds a month, necessary to meet the 18.4 billion pounds calculated needs to pick up considerably.

These annual feedstock projections rest on a number of assumptions and are subject to several uncertainties. First, and most important, the projections inherit all of the uncertainty in the underlying production and import projections. The domestic production figures assume capacity utilization of 90 percent in 2026 and 95 percent in 2027, which are aggressive rates by the standards of the recent past. If production falls short of these levels—and the early-2026 pace suggests it could—feedstock use would be correspondingly lower.

Second, the split between domestic and imported feedstock depends on the assumed domestic feedstock shares of 85 percent for biodiesel and 60 percent for renewable diesel. The actual response of feedstock sourcing to the 45Z penalty on non-North American feedstock is not yet known. If domestic plants substitute toward domestic feedstock more aggressively than we assume, imported feedstock use would be lower and domestic use higher; if the substitution is more limited, the reverse holds.

Third, the level of biomass-based diesel imports is itself uncertain. We assume imports of 0.60 billion gallons in 2026 and 1.30 billion in 2027, but imports have nearly stopped under the 45Z credit, and it is not yet clear whether D4 RIN prices will rise enough to draw them back. Because imported fuel is made entirely from imported feedstock, lower imports would reduce imported feedstock use and shift more of the burden onto domestic feedstock—provided domestic production rises to fill the gap.

The trade uncertainties in these projections cannot be underestimated. The U.S. has historically imported large volumes of both finished renewable diesel and feedstock, particularly low-CI feedstocks such as used cooking oil and tallow that command premium prices under the LCFS. The 45Z credit upends the economics of those flows by denying eligibility to feedstock produced outside North America, but it does not tell us how importers and producers will respond. Imported feedstock could pull back sharply, or it could prove more resilient than expected if the LCFS premium on low-CI feedstock remains large enough to keep imports economic for fuel sold into the California market. Just as uncertain is how the mix of feedstocks will shift.

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Implications

The final Set 2 RVOs imply a large increase in biomass-based diesel feedstock use in 2026 and 2027.

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These layers interact, so a shortfall in one pushes demand into the others. The bottom line is that the final RVOs ask the sector to draw feedstock at a scale beyond anything in the recent record, while leaving genuinely open how the market will actually deliver these volumes across fuel imports versus domestic production, domestic versus imported feedstock, and the feedstock mix itself.

References

Bukowski, M., and B. Swearingen. “Special Article: Vegetable Oils and Fats Use for Biofuels Production is Forecast to Expand under Current U.S. Biofuels Policies.” Oil Crops Outlook, U.S. Department of Agriculture, Economic Research Service, Situation and Outlook Report, May 2026. https://ers.usda.gov/media/20879/ocs-26e.pdf?v=68086

Hubbs, T. and S. Irwin. “Rewriting the RFS Playbook: The Impact of Revised RVOs on Projected Biomass-Based Diesel Production and Feedstock Use for 2026-2027.” farmdoc daily (15):209, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, November 12, 2025.

Hubbs, T., and S. Irwin. “Rewriting the RFS Playbook: Final 2026–2027 RVOs for Biomass-based Diesel.“ farmdoc daily (16):66, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, April 16, 2026.

Hubbs, T., and S. Irwin. “Rewriting the RFS Playbook: The Impact of Final RVOs on Projected Biomass-Based Diesel Production and Imports for 2026-2027.“ farmdoc daily (16):101, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, June 10, 2026. READ MORE

Related articles

EPA Focuses the RFS on American Farmers (Clean Fuels Alliance America)
Max Production (Biobased Diesel Daily)
Biomass-Based Diesel Feedstock Demand Projected to Climb 57% in 2026, 81% in 2027: Analysis (OPIS)

Excerpt from Clean Fuels Alliance America: The primary driver behind the Environmental Protection Agency’s historic 2026 – 2027 RFS volumes is the program’s benefit to American farmers. In a major turnaround from previous rules, the agency found there is no constraint on farmers’ ability to deliver biofuel feedstocks. Moreover, EPA determined that the RFS can drive additional investment and economic opportunity for rural America.

“These volumes reflect our consideration of the impacts of these fuels on the statutory factors, including the potential increases in employment and economic impacts for renewable fuel producers, feedstocks producers and processors, and the rural communities in which these facilities are located.” – EPA, RFS Program Standards for 2026 and 2027

EPA’s action is well-timed. U.S. farmers have faced several years of economic hardship from rising input costs for fuel and fertilizer. They’ve lost important overseas markets to trade barriers and foreign competition. From March 2025 to February 2026, U.S. agriculture lost $14.9 billion in annualized sales to China due to tariffs, a new study from economists at North Dakota State University finds. Soybean farmers absorbed nearly half of those losses ($6.8 billion). And soybean-growing states like Iowa, Illinois, Kansas, Nebraska and Minnesota experienced the heaviest losses.

Increasing domestic biodiesel, renewable diesel, and SAF production through the RFS can provide a stable, predictably growing domestic market for U.S. farmers and improve economic prospects. EPA recognizes in the rule that higher commodity prices are justified – even necessary – to boost income for American farmers. The agency states plainly in the final rule and accompanying regulatory impact analysis that building domestic markets and reducing reliance on export markets is a primary reason to increase RFS volumes.

EPA is purposefully building a domestic market for U.S. farmers. The agency anticipates biomass-based diesel production from soybean oil to nearly double from approximately 1.3 billion gallons in 2025 to more than 2.5 billion gallons in 2027. It also projects increasing use of other crop oils – canola in particular – and co-products of crops like distillers corn oil.

The agricultural economy is already responding to the signal. Domestic biodiesel, renewable diesel and SAF production are reaching capacity utilization rates not seen since 2024. Renewable diesel and SAF producers ran at historically high rates in May, positioning to ramp up even further. In April, U.S. biodiesel companies produced 129 million gallons of fuel; the highest monthly production rate in recent years was 176 million gallons. Biodiesel producers ran about 75% of their demonstrated capacity in April and May.

That’s generating vital market pull for farmers. The clean fuels industry’s March production utilized record amounts of domestic soy oil and distillers corn oil, according to Energy Information Administration data. Increasing availability of soy, canola and other crop oils reflects the investments the oilseed processing industry has made over the last several years.

And more growth is expected. In its May 2026 and June 2026 World Agricultural Supply and Demand Estimates (WASDE) reports, USDA expects soybean oil use in biomass-based diesel to reach 17.8 billion lbs. in the 2026-27 marketing year – essentially 1.5 billion lbs. per month.

USDA projects U.S. soybean crush at 2.75 billion bushels this year – which would produce approximately 32.4 billion lbs. of soybean oil. If USDA economists are right, U.S. biodiesel, renewable diesel, and SAF production would provide a value-added market for 50% of this year’s available domestic soybean oil.

Past growth in U.S. biodiesel and renewable diesel was founded on the growing surplus of oil. But increased clean fuel production is now driving demand for oil, investment in domestic processing capacity, and sustained value to farmers. As illustrated in the chart below, domestic soybean oil supplies used in biodiesel and renewable diesel have increased steadily with growing farm productivity. The amount used in food and other applications has been stable for nearly two decades, even with population increases.

Biomass-based diesel production represents 10% of the value of every bushel of soybeans grown in the United States, when you consider data from the past decade. As more and more of the value of the soybean crop is derived from the oil, the domestic biodiesel and renewable diesel market becomes a more critical and reliable part of the value.

EPA calculates that the recently finalized 2026-2027 RFS volumes will generate $10.08 billion annually in rural economic development benefits over the next two years. Those economic benefits are targeted to U.S. farmers in terms of higher commodity prices and increased GDP. But they are additive to the energy security and other societal benefits delivered to the American economy.

Importantly, EPA recognizes that additional investment, job creation, and industry expansion is possible. The agency carefully and fully assessed the announced investments and planned expansions for oilseed processing and fuel production. And then it recognized that companies who made investments in the last few years are unlikely to do so in future unless they have a reasonable expectation of a return on their current investments.

“Increasing domestic production of biodiesel and renewable diesel is also expected to result in increased investment in domestic oilseed crushing to supply feedstocks for biofuel production. These investments would decrease the reliance of domestic soybean producers on export markets and further benefit rural economic development and employment.” – EPA, RFS Program Standards for 2026 and 2027

Biodiesel, renewable diesel, and SAF already provide an essential market for American farmers. A strong domestic market is the best opportunity for farmers to regain economic momentum after several years of challenging market conditions.

The clean fuels industry appreciates EPA’s emphasis in this RFS rule on rural economic development, job creation, and investment in domestic production capacity and feedstock supply. For years, we’ve asked EPA to recognize not just the existing biomass-based diesel production and feedstocks supply, but also the potential for future growth. This is the right course for the RFS program. It will be important to maintain this approach in the upcoming rule for 2028 and beyond to provide certainty and stability to farmers.

ABOUT CLEAN FUELS ALLIANCE AMERICA

Made from an increasingly diverse mix of resources such as recycled cooking oil, soybean oil, and animal fats, the clean fuels industry is a proven, integral part of America’s clean energy future. Clean Fuels Alliance America is the U.S. trade association representing the entire biodiesel, renewable diesel and sustainable aviation fuel supply chain, including producers, feedstock suppliers and fuel distributors. Clean Fuels receives funding from a broad mix of private companies and associations, including the United Soybean Board and state checkoff organizations. READ MORE