By David Kubik, ISA Biofuels & Trade Policy Manager

Imported feedstocks, such as used cooking oil (UCO), are threatening the demand for U.S. soybean oil in the biodiesel industry. Biofuel producers are increasingly turning away from conventional crop-based feedstocks, like soybean oil, in favor of waste feedstocks. These waste feedstocks have been assessed by state and federal regulators as producing fewer life-cycle emissions. The nonscientific models they use to make that assessment factor in an assumed increase in soybean acres needed to supply demand for fuel production.

As a result, waste feedstocks are receiving larger low-carbon fuel standard (LCFS) credits in biofuel production, making soybean oil feedstocks less profitable for fuel production.

In 2022, the Clean Fuel Production Credit (45Z) was passed as part of the federal Inflation Reduction Act (IRA). Starting in 2025, when the current tax credits expire, it will generate more subsidies for fuels that produce fewer greenhouse gas emissions using the same assessment factors.

Illinois Soybean Growers (ISG) took the lead in alerting the agricultural community about how 45Z will negatively impact the price of soybean oil. This provision dramatically reduces the incentive biofuel producers receive for soy biomass-based diesel from $1 per gallon to just 35 cents per gallon.

According to a recent study commissioned by the Illinois Soybean Association (ISA), this policy would cost the average Illinois farmer over $3,300 per year and put soy-based biodiesel producers at risk of shutting down. In fact, two soy biodiesel refiners recently closed in anticipation of this policy going into effect.

Since the IRA passed, overseas used cooking oil (UCO) has become a more dominant player in the biomass-based diesel industry. The U.S. has seen an increase of over half a billion gallons, displacing soybean oil because California favors UCO in its LCFS. As a result, soybean oil now makes up only 13.4 percent of the biomass-based diesel market in Q1 2024. This is a significant decline from 19.3 percent in 2022 and 17.2 percent in 2023. This decline in market share is expected to continue after the 45Z credit goes into effect.

Additionally, soybean oil prices have fallen over 50 percent, from a high of 89 cents per pound in August 2022 (the month the IRA passed) to just 43 cents per pound in October 2024.

On the positive side, ISG has made significant headway to mitigate the impact of this detrimental policy on farmers:

• ISG pushed for the passage of the first-in-the-nation Illinois Sustainable Aviation Fuel (SAF) purchasing incentive, which will disallow imported feedstocks after 2028.
• Minnesota quickly followed with identical language, removing imported feedstocks from their SAF credits.
• ISG encouraged 16 U.S. senators (including Senators Duckworth and Durbin) to sign a letter to the U.S. Treasury stating that only domestic feedstocks should be eligible for credits funded with U.S. taxpayer dollars.
• In September 2024, 41 U.S. representatives signed a similar letter, including four from the Illinois delegation, with whom ISG worked.
• In October 2024, with support from ISG, Sen. Sherrod Brown (D-OH) filed bipartisan legislation to codify domestic feedstocks into law.

At the end of the day, ISG believes American tax dollars should be invested in domestic industries that use domestic feedstocks, such as Illinois-grown soybeans, to ensure energy independence.

Please join ISG in this critical fight. Sign your name to the petition by scanning the QR code below and urge your legislators to protect farmers by protecting the U.S. soybean oil market.