US Biofuels Remain Constrained As Feedstock Usage Falls And Economics Stay Negative

The theme today is the United States, even though Europe and global vegetable oils continue to shape pricing signals. The US feedstock usage data from October, while backward looking, remains the best structural reference for how early 2026 is unfolding. When combined with current margin screens and energy structure, it paints a difficult picture for advancing the sector.

Total US feedstock consumption in October fell by nearly 13 percent versus October 2024. Month over month, volumes declined by roughly 1.5 percent from September. All major feedstocks declined except tallow. This confirms a broad contraction in renewable fuel input demand tied to margin pressure and policy uncertainty rather than seasonal effects.

Tallow usage increased 8.43 percent month over month to a record 893 million pounds, lifting its share of the feedstock slate to roughly 29 percent. Soybean oil declined 4.47 percent month over month and slipped below 33 percent of the mix, the lowest share since April 2025. Used cooking oil fell 4.51 percent, distillers corn oil declined 4.47 percent, canola dropped 2.95 percent, and white grease collapsed more than 41 percent. Versus last year, this represents a clear pullback across the slate rather than substitution between feedstocks.

The biodiesel versus renewable diesel split in October stood near 56 percent biodiesel and 44 percent renewable diesel. Implied biodiesel run rates eased to roughly 61 percent from around 62 percent in September, while renewable diesel utilization slipped to about 68 percent from 69 percent. Conditions deteriorated further into November, with renewable diesel utilization near 66 percent and biodiesel closer to 53 percent. December margins weakened again before stabilizing modestly in early January with the roll into 2026 vintage D4 RINs.

A key constraint for early 2026 is how the US market is treating RIN equivalence. There has been no formal regulatory change. In practice, producers, lenders, and traders are now screening economics using an effective 1.6x RIN equivalence rather than 1.7x. This is a risk adjustment driven by the absence of clear EPA and Treasury guidance. The reduction materially lowers forward margins and directly impacts utilization and feedstock demand.

That pressure is visible in biodiesel economics. The current biodiesel screen crush margin remains near negative 33 cents per gallon. Even assuming a 45Z credit in the range of 16 to 20 cents per gallon, forward production still locks in a loss. This makes it difficult to justify sustained biodiesel run rates or forward feedstock commitments, regardless of relative feedstock pricing.

Europe reflects the same caution through price construction rather than volume data. In today’s ARAG window, premiums were largely unchanged while the energy base weakened further. Using March ICE gasoil near $615 per metric ton as the reference, flat prices moved lower. FAME traded around plus $660 per ton over gasoil, implying a flat price near $1,275 per ton. RME traded near plus $825 per ton, implying a flat price close to $1,440 per ton. UCOME traded between $760 and $780 per ton over gasoil, yielding flat prices near $1,375 to $1,395 per ton.

Energy structure continues to erode support. The ICE gasoil Jan Apr backwardation, which reached as high as plus $50 per ton in November 2025, has compressed to roughly plus $9 to $10 per ton. January expires on the 12th. As the front rolls off, the curve anchors further out where spreads are already flatter. The loss of backwardation removes carry income and tightens working capital across the chain.

At the same time, the vegetable oil complex firmed. March BOGO rose again today to roughly plus $487 per ton. This reflects soybean oil strength relative to gasoil. CME March soybean oil traded near 49.9 cents per pound. Malaysian CPO moved toward 4,010 ringgit per ton, while European rapeseed oil firmed with FOB Rotterdam values near €1,040 to €1,050 per ton for nearby positions.

Taken together, the signals align. US feedstock usage in October is down nearly 13 percent year over year. Biodiesel economics remain negative even with prospective 45Z credits. Energy backwardation has unwound sharply. Vegoil spreads are firming, but they are not enough to offset weak fuel economics. Early 2026 remains defined by constrained utilization, limited forward commitment, and a market focused on capital preservation rather than growth.