The US Environmental Protection Agency (EPA) on Thursday released its renewable fuel standards blending proposal, which calls for only modest increases in renewable blending volumes over the next three years.
CBOT soybean oil futures fell 4.5%, closing limit-down, on Thursday, as the biodiesel mandates were increased less than expected. Futures prices continued lower in intraday trading on Friday.
The EPA proposed raising biomass-based diesel blending from this year's 2.76 billion gallons to 2.82 billion gallons in 2023, 2.89 billion in 2024, and 2.95 billion in 2025. The proposed mandates amount to just over a 2% increase in each of the next three years.
The proposed targets are below the industry’s existing production and don’t take into account sizable investments in planned new capacity, as Gro wrote about here. However, the EPA’s proposed mandates are the floor, not the ceiling, allowing the industry to blend as many gallons as they see profitable.
Soybean oil represents the primary feedstock in renewable diesel (a biomass-based diesel) in the US, although cooking oil, animal fats, and other vegetable oils also are used. Some 46% of the soybean oil produced in the US is projected to go into making renewable diesel and other biofuels in 2022/23, up from 42% last year, as shown in this Gro display of crushing industry data. As renewable diesel production capacity continues to grow, its share of total soybean oil demand will increase as well.
The conventional biofuel (corn-based ethanol) blending proposal for 2023 was left unchanged from recent years at 15.0 billion gallons. There is a small increase proposed for 2024 and 2025.
Cellulosic biofuel, produced from wood, grasses, and other plants, is expected to rise from this year's 630 million gallons to 2.13 billion in 2025.
The EPA’s volume levels aren’t yet final and could change before publication. The agency said it is seeking public input on the proposal to help shape the RFS program in the years ahead. The proposal, which is expected to be finalized by the EPA in mid-2023, is part of a broader push by the Biden administration to promote greener energy sources and support biofuels produced in rural America.