US agribusinesses and farmers will benefit from strong soybean oil demand if the Environmental Protection Agency (EPA) finalizes its proposal to cut Renewable Identification Number (RIN) credits generated from non-domestic feedstocks, Darling Ingredients said today.
The move is expected to support the US agriculture industry and benefit US farmers, aligned with the intent of the Renewable Fuel Standard (RFS) program, Darling chief financial officer Bob Day said Monday during a Bloomberg Intelligence forum. Darling Ingredients and refinery Valero run the Diamond Green Diesel joint venture.
The EPA proposal would halve RIN credits generated from foreign biofuels and biofuels produced from foreign feedstocks, a major policy shift that could increase US soybean oil demand while pressuring renewable diesel (RD) plants that source large volumes of foreign feedstocks.
The EPA has proposed a target of 7.12bn biomass-based diesel D4 RINs for 2026, equivalent to 5.61bn USG, above most market expectations for the Renewable Volume Obligation (RVO).
Because of the feedstocks capacity that has been added in recent years, the industry's ability to meet the biofuel mandate with domestic feedstocks is much closer than it was several years ago, Day said. "It will incentivize more oilseed crush and more ag business in the US, which is one of the objectives of this administration," he said.
Five new soybean crush plants came online last year, with two more expected to begin operations before the end of this year as policies look favorable for soybean oil. US soybean crush margins are trending above the five-year average, with soybean oil prices touching a 21-month high in July, trading over 2024 levels and nearing parity with the five-year average.
The market will "adjust" to meet the final mandate for biomass-based diesel, said Carlos Paz, Darling's executive vice president of global risk management. "We still have a lot of tariffs in place, but we could run the renewable diesel industry with domestic supply and run the food industry with imports," he said.
Foreign used cooking oil (UCO) prices could drop to a level that incentivizes the build-out of more renewable fuel capacity outside the US, Day said.
There is still uncertainty around future biofuels policy, notably including President Donald Trump's approach to handling a long backlog of requests from small refiners for exemptions from biofuel blend mandates. EPA during Trump's first term handed out waivers generously, eating into biofuel demand at the time. The EPA recently predicted that exemptions for the 2026 and 2027 compliance years could total anywhere from zero to 18bn USG of gasoline and diesel.
"Too many SREs means a small mandate, meaning low prices for the farmer," Paz said. "We are confident that however SREs are handled, it will support a robust agricultural economy, which will support RD and SAF margins."
The company continues to take a bullish stance on the future because of the RVO proposal, despite challenging economics for most of this year. "As long as the underlying mandate holds anywhere near the numbers they are talking about, we expect our business to see a dollar-plus per gallon type of margins, so we are confident in that outlook," Day said.
Deteriorating margins have caused biofuel producers to slash run rates. Diamond Green Diesel, the largest US producer of RD and SAF, said on 24 July that it will keep one of its units offline and will reassess the status of another after completing maintenance in August.
US refiner Phillips 66 is poised to slash run rates at a California biofuel plant by even more than it already has this year if margins do not improve, the company said last month July.
