The USDA’s monthly Fats and Oils report released on Monday, February 3 showed US processors crushed a new all-time record high of 218 million bushels of soybeans in December.
At the same time, domestic soybean oil stocks edged up to 1.7 billion lbs, from 1.62 billion lbs a month earlier, suggesting that implied US soybean oil demand continued to drop for another month in December.
In November, soybean oil remained the primary feedstock used in biomass-based biodiesel production and accounted for 36% of the total monthly feedstock used, figures released on January 31 by the US Energy Information Agency (EIA) showed.
While US biodiesel plants consumed a record 724 million lbs of soybean oil in November, up by 2% from October, renewable diesel facilities used 467 million lbs, down by 10% on the month. Total soybean oil demand reached 1.19 billion lbs.
Soybean oil demand from the renewable diesel sector started to decline in the last quarter of 2024, when producers started to slow and/or stop their feedstock purchases due to tax uncertainty related to the transition from the Blender’s Tax Credit (BTC) to the Clean Fuel Production Credit (CFPC), or 45Z.
In early January, the outgoing Biden Administration issued an “intent to propose” guidance on 45Z, as well as a long-awaited update to a model that allows biofuel producers to determine their feedstock emissions rate under the credit.
Preliminary guidance on 45Z, which provided a bit more clarity for the market, came out on January 10, but was not officially published in the Internal Revenue Bulletin until February 3.
Ongoing market confusion was only compounded after President Donald Trump was sworn into office on January 20 and quickly released a flurry of executive orders, one of which, “Unleashing American Energy,” was to temporarily pause federal distribution of funds appropriated through the country’s Inflation Reduction Act (IRA) of 2022.
Federal grants and loans were impacted by the executive order, but several market sources told Fastmarkets that the IRA tax credits, including 45Z, were not likely to be impacted since they are not disbursements of appropriated funds.
