U.S. biodiesel production climbed to its highest level in over a year, while imports effectively dropped to zero, signaling a major shift toward domestic supply as federal policy and market conditions realign.
According to the U.S. Energy Information Administration, net biodiesel production rose 20% month-over-month in February to approximately 84,000 barrels per day (bpd), marking a 14-month high. Production also increased roughly 20% compared to the same period last year, when output averaged around 69,000 bpd.
Growth was observed across key producing regions—including the Midwest, Gulf Coast, and West Coast—highlighting a broad-based recovery in operating capacity. East Coast production remained relatively flat, reflecting ongoing structural reliance on imports and blending infrastructure rather than production.
This production rebound aligns closely with improved policy clarity under the federal Renewable Fuel Standard (RFS). Recent updates from the U.S. Environmental Protection Agency establishing stronger Renewable Volume Obligations (RVOs) for 2026 and 2027—particularly for biomass-based diesel—have helped restore confidence across the industry. Industry stakeholders, including the Iowa Biodiesel Board, have noted that the updated volumes better reflect actual production capacity, encouraging idled facilities to restart and supporting new investment.
Additional support is coming from agricultural markets. The U.S. Department of Agriculture recently projected record soybean oil use for biofuel production in the 2026/2027 marketing year. This reflects continued growth in feedstock demand, driven not only by biodiesel but also renewable diesel and sustainable aviation fuel (SAF), all of which rely heavily on lipid-based inputs such as soybean oil, used cooking oil, and animal fats.
Looking ahead, the EIA has revised its 2026 production outlook upward, projecting biodiesel output to average approximately 109,000 bpd for the remainder of the year, up from a prior estimate of 104,000 bpd. This increase underscores expectations that stronger policy signals and improved economics will sustain higher production levels.
Exports Show Modest Recovery
U.S. biodiesel exports ticked up slightly to around 2,000 bpd in February, matching levels seen a year earlier. According to U.S. Census Bureau data, exports rebounded from a decade low, largely due to renewed demand from Canada. Canadian clean fuel policies and provincial-level carbon programs continue to support cross-border biodiesel trade, though volumes remain relatively modest compared to historical peaks.
Imports Collapse as Policy Incentives Shift
In contrast, biodiesel imports fell to zero in February, a sharp decline from roughly 6,000 bpd during the same period last year. This dramatic shift reflects a fundamental change in market incentives.
The expiration of the Blender’s Tax Credit at the end of 2024—combined with the transition to the Clean Fuel Production Credit (45Z) and increased scrutiny of foreign feedstocks—has significantly reduced the economic viability of imported biodiesel. Additionally, evolving RFS proposals and sustainability criteria have further limited the role of imports in meeting U.S. blending requirements.
As a result, domestic producers are capturing a larger share of the market, reinforcing a broader trend toward U.S.-based production and supply chain resilience.
Market Implications
The combination of rising production, declining imports, and stronger federal mandates points to a tightening but more stable domestic biodiesel market. With U.S. biomass-based diesel capacity already exceeding 7 billion gallons annually when including renewable diesel, the updated RFS volumes are expected to better utilize existing infrastructure while supporting feedstock demand for U.S. agriculture.
At the same time, ongoing adjustments to tax policy, lifecycle carbon accounting, and fuel standards will continue to shape how biodiesel competes with renewable diesel and other low-carbon fuels. For fleets and fuel buyers, this evolving landscape could translate into improved availability, more competitive pricing, and expanded opportunities to reduce lifecycle emissions using domestically produced fuels.