By Siddharth Cavale and Jarrett Renshaw
NEW YORK, April 30 (Reuters) - The U.S. biodiesel industry, still recovering from one of its most difficult years, will have a hard time ramping up production fast enough this year to meet the Environmental Protection Agency's most ambitious biofuel blending mandates on record.
With fuel prices surging during the U.S.-Israeli war on Iran, the EPA set its ambitious biofuel targets in late March. To meet the record target, companies that process soybeans into biodiesel
must boost production by over 60% this year. Some industry bodies and biofuel experts doubt they will succeed, yet failure could further stoke the rise in diesel prices.
Farmers and agricultural groups have long lobbied Washington seeking higher biofuel mandates. U.S. soybean prices swooned last year, with exports down as China switched to Latin American crops in response to President Donald Trump's tariffs. Farmers are a prized political constituency for Trump and his Republican Party in their campaign to maintain thin majorities in Congress in November's midterm elections.
The EPA set biodiesel and renewable diesel volume requirements of 5.4 billion gallons for 2026 and 5.7 billion for 2027, up from 3.35 billion last year.
"NOT EVEN REMOTELY CLOSE TO WHAT WE NEED"
EPA estimates that meeting the new obligations will require an actual supply of 6.07 billion gallons this year. That figure exceeds the mandates because some domestically produced biofuels are exported or otherwise don't generate compliance credits.
Under the Renewable Fuel Standard, refiners are required to blend billions of gallons of biofuels into the nation's fuel supply each year or purchase credits, known as RINs, from those that do.
Failure to reach the blending targets will force refiners and other obligated parties to draw on previously generated credits - known in the industry as the RIN bank - to comply with the EPA quotas, which could raise their prices. Those higher compliance costs can filter down to the pumps.
Scott Irwin, an agricultural economist at the University of Illinois and well-known expert on biofuels, estimates that obligated parties must generate 915 million credits per month to meet the EPA's mandates.
Credits generated from biodiesel (D4) blending rose to 651 million in March from 481 million in the prior month, according to the latest EPA data from April 16.
"We are not even remotely close to what we need. It seems obvious that we're headed for some big deficits and a big deficit build into 2027," Irwin said.
The U.S. Energy Information Administration, in its latest Short‑Term Energy Outlook, forecast U.S. supply of about 1.52 billion gallons of biodiesel and 3.53 billion gallons of renewable diesel in 2026, a combined total below the EPA’s requirement.
INDUSTRY SCRAMBLES TO RAMP UP OUTPUT
Industry executives say they are scrambling to ramp up output where possible.
"The biodiesel industry is concerned about how they are going to meet this ... it is always a challenge to coordinate supplies of feedstocks and get the fuel to market," said Paul Winters, director of public affairs and federal communications at the Clean Fuels Alliance of America, which represents renewable fuel producers.
The American Fuel and Petrochemical Manufacturers (AFPM), which represents refiners, has said the EPA’s targets exceed what domestic feedstock supplies can support and also will boost compliance costs.
AFPM did not respond to requests for comment.
MIDWESTERN PRODUCERS SAY: "WE'RE READY"
Soft demand for biodiesel and renewable diesel in past years had forced many producers to idle plants or run them far below capacity. Now the challenge is bringing them back online to max capacity.
In Iowa, which accounts for more than 23% of U.S. biodiesel production, plants that were idle earlier this year are ramping up as fast as possible to run at full capacity following the EPA’s announcement, said Monte Shaw, executive director of the Iowa Renewable Fuels Association.
He cautioned, however, that hitting the state's combined annual output of 400 million barrels will be difficult without clarity from the Trump administration on how producers can secure clean fuel credits under a new program called 45Z.
"With one quarter of the year already gone ... that adds pressure," Shaw said.
To the north, the Minnesota Soybean Processors integrated soy crusher and biodiesel producer restarted its idled Brewster plant within a week of the EPA’s announcement. The facility is now ramping toward 35 million gallons of output this year, up from 25 million gallons in 2025.
"The demand signal is big ...and we’re ready," said Jeramie Weller, general manager of Minnesota Soybean Processors.
Processors say running at full capacity is possible with time, but expanding beyond that is difficult as steel and aluminum tariffs have driven up construction costs, and logistical and labor bottlenecks linger.
As of January 1, 2026, the U.S. had 1.96 billion gallons of operable biodiesel capacity and 4.89 billion gallons of operable capacity for renewable diesel and other biofuels, including sustainable aviation fuel - likely enough to meet the 2026 quotas, according to EIA data.
But actual production told a different story: combined biodiesel and renewable diesel output in 2025 totaled just 2.9 billion gallons.
Although soybean supplies are currently ample, traders and analysts expect stocks to tighten by the fourth quarter as biodiesel production rises.
"To meet the renewable volume obligations, we need both biodiesel and renewable diesel running at 85-90% capacity. And probably need to build additional capacity for 2027," said Winters. "That is going to be a huge challenge."
(Reporting by Siddharth Cavale in New York and Jarrett Renshaw in Washington; additional reporting by Karl Plume in Chicago; Editing by David Gregorio)
