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For decades, the trajectory of the U.S. soybean industry was defined by its success in international export markets. Recently, however, a fundamental shift has occurred as geopolitical challenges and trade shocks coincide with a surge in domestic demand for soybean oil as a primary feedstock for renewable diesel and biodiesel. According to a detailed economic analysis by ASA Economics Intern Taylor Gillit and ASA Chief Economist Scott Gerlt, PhD, the volume of soybean oil dedicated to biofuel production climbed from 8.9 billion pounds in 2020 to an estimated 14 billion pounds by 2025. This domestic pivot has catalyzed significant investment in soybean crushing capacity, yet it raises a critical question for the sector: has this burgeoning biofuel demand been enough to maintain prices in the face of dwindling exports?
To evaluate this, the American Soybean Association utilized an updated economic model to simulate price impacts based on a benchmark of Marketing Year (MY) 23/24 demand levels. The study measured how changes in whole bean export demand and domestic biofuel consumption influenced prices for beans, oil, and meal. The analysis factors in various market developments, including South American crop conditions, revisions to biofuel tax policies, and the influx of competing feedstock imports. Importantly, the model captures the reality of the 2025 trade environment, where Chinese demand—historically exceeding 22 million metric tons (MMT) per year—is projected to drop to just over 12 MMT in MY 26/27.
In the near term, the results indicate that biofuel growth has not yet fully bridged the gap. For MY 24/25, the model shows that shifting export demand accounted for a $0.81 per bushel decline in soybean prices. Simultaneously, biofuel demand actually contributed a further $0.06 decline, resulting in a total price reduction of $0.87 per bushel. This unexpected biofuel drag was attributed to low 2023-2025 renewable volume obligations (RVOs) under the Renewable Fuel Standard and the transition from the $1.00 per gallon 40A Biofuel Blenders Credit to the lower, variable 45Z Clean Fuel Production Credit in 2025. This policy shift led to a production surge in late 2024 followed by a collapse in early 2025 as blending obligations failed to support the market.
Looking toward MY 25/26, the pressure remains significant. Weaker export demand is projected to reduce prices by as much as $1.60 per bushel, or up to $2.10 if production remains fixed and cannot adjust to the trade war conditions. While biofuel demand is expected to provide a support cushion of $0.22 per bushel during that period, the net loss remains substantial. The inward shift of the U.S. soy demand curve has been further exacerbated by Brazil's production recovery following its MY 23/24 drought, which increased global supply while Chinese import demand fluctuated.
However, the outlook for MY 26/27 offers a potential turning point. If the October 2026 USDA WASDE projections are realized, a combination of revived Chinese export purchases and expanding biofuel value could result in a net price increase of $0.18 per bushel. In this scenario, domestic biofuel demand is estimated to lift prices by $0.42 per bushel above MY 23/24 levels. While soybean oil prices remain directly tied to biomass-based diesel production, the overarching economic health of the sector continues to rely on a delicate balance between stabilizing international trade relations and the continued growth of the domestic renewable energy market.
Source: American Soybean Association