A new report from the US Department of Agriculture (USDA) finds that the sharp growth in US renewable diesel production and capacity is causing significant, market-altering shifts both domestically and to foreign feedstock trade.

Renewable diesel, like biodiesel, is produced from the same renewable feedstocks such as vegetable oils, animal fats, or used cooking oil (UCO). The difference is that renewable diesel is produced using a hydrogen treatment which makes it chemically equivalent to petroleum diesel and can therefore be blended at higher levels and transported using existing pipelines.

Source: USDA

The growth is policy-driven by both federal and state entities aiming for reduced emissions. To meet the demand, the United States is rapidly expanding imports of animal fats and vegetable oils to both use as feedstocks for renewable diesel production and to backfill other feedstocks, such ad soybean oil, that have been diverted to renewable diesel production.

Domestically, US soybean crush expanded to produce more oil, driven by high soybean oil prices fueling strong crush margins. While domestic demand grew, US soybean exports declined on expanding Brazilian supplies and slowing growth of global import demand. Additionally, US soybean oil premiums rocketed so far above global vegetable oil prices that US exports plummeted, and the United States became a net soybean oil importer for the first time in 2023.

Higher soybean crush is driving the opposite for meal exports, as an abundance of soybean meal, combined with drought in Argentina—the world’s largest soybean meal exporter—has boosted exports with the potential for continued growth.

While many wildcards could affect the US biofuel, animal fats, and oilseed markets, renewable diesel production is anticipated to continue to grow and alter feedstock markets, the USDA report said. The rate of production growth, however, will be highly dependent on federal and state policies, availability of feedstocks, and sustained US soybean meal export gains.