MethodologyContact usSupportLogin
The update incorporates provisions from the One Big Beautiful Bill Act (OBBB), including the removal of indirect land-use change (ILUC) emissions from calculations beginning in 2026, alongside restrictions limiting eligible feedstocks to those produced or grown in the US, Canada and Mexico.
The results were largely in line with market expectations. Soybean oil and canola are expected to benefit most from the removal of ILUC penalties, while DCO, UCO and tallow remain among the most attractive feedstocks. But the update also clarified relative feedstock economics and highlighted how much the gap between crop-based oils and waste-based feedstocks may narrow under the revised framework.
Under illustrative biodiesel pathways, DCO remains the highest-value feedstock with an estimated 45Z credit of approximately $0.80 per gallon. Domestic UCO is estimated at approximately $0.64 per gallon, compared with roughly $0.61 per gallon for UCO sourced from Canada and Mexico, while tallow is estimated at approximately $0.63 per gallon.
The largest changes were observed in crop-based oils. Soybean oil’s estimated biodiesel credit increased to approximately $0.60 per gallon from roughly $0.35 per gallon previously, while canola rose to approximately $0.34 per gallon from around $0.02 per gallon. Both gains reflect the removal of ILUC penalties that had historically constrained crop-based feedstocks.
“The update doesn’t really change much for DCO, UCO or tallow,” one market participant said. “The story is that soybean oil got a lot better.”
Soybean oil now sits materially closer to UCO and tallow than under previous assumptions, narrowing a policy-driven advantage that waste-based feedstocks have held in recent years. DCO remains the highest-value pathway, but the gap between soybean oil and competing feedstocks has narrowed considerably.
That shift could compress premiums that animal fats and DCO have historically maintained over soybean oil due to their superior carbon-intensity performance.
The improved economics come as domestic demand expectations continue to strengthen. In its June World Agricultural Supply and Demand Estimate report, the USDA increased 2025/26 soybean crush by 20 million bushels and reduced exports by the same amount, while raising forecasts for soybean oil production and use and lowering ending stocks.
Initial USDA projections for 2026/27 showed soybean crush rising by 100 million bu year on year, with domestic soybean oil use expected to increase by approximately 1.24 million tonnes.
Fastmarkets’ analysis shows soybean oil’s share of total US biofuel feedstock consumption rising from around 28% in early 2025 to more than 40% in early 2026, the highest level in more than two years and a sign of renewed demand for crop-based oils as renewable fuel economics improve.
That trend is already visible in market data. The May National Oilseed Processors Association (NOPA) report released on Monday June 15 showed soybean oil inventories declining more sharply than expected despite strong margins and peak seasonal run rates, underscoring the risk that demand growth could outpace supply even during periods of elevated crush activity.
US soybean crush utilization is estimated at approximately 95%, suggesting the industry is already operating near capacity during a peak seasonal period, with limited flexibility to significantly increase output if demand continues to accelerate.
Several market participants said stronger renewable fuel economics, elevated Renewable Identification Number (RIN) prices and tightening soybean oil inventories are increasingly shifting attention from feedstock qualification toward feedstock availability and competition for physical supply.
The updated model also introduces a distinction between domestic US UCO and material sourced from Canada and Mexico, reflecting transportation emissions rather than eligibility changes. This creates a modest divergence in valuation tied to logistics and feedstock origin.
These distinctions come as the market continues to balance constrained domestic feedstock supplies with imported material to meet growing renewable fuel demand. While UCO volumes have declined from recent highs as China retains more material domestically, April trade data pointed to renewed inflows of both UCO and tallow, particularly from Brazil, Asia and Australia, with higher domestic prices continuing to support arbitrage opportunities.
Despite the additional clarity provided by the updated model, key questions remain regarding how the revised 45Z framework will ultimately be implemented. Additional Treasury guidance is still expected on pathway approvals, feedstock eligibility, traceability requirements, recordkeeping, blended feedstocks and allocation methodologies, which will ultimately determine how the credit functions in practice.
“The GREET update tells us where things are likely headed,” one participant said. “But we’re still waiting for [the Department of the] Treasury to tell us exactly how the rules are going to work.”
The release largely confirmed market expectations, but it also suggests the competitive landscape is shifting. As the economic gap between feedstocks narrows and renewable fuel demand continues to grow, feedstock availability may become just as important as feedstock qualification in determining renewable fuel economics.
“The next challenge may not be identifying eligible feedstocks,” one market participant said, “but securing enough supply to meet growing demand.”
For those trading in the biofuels and feedstocks market, we capture pricing across the complex marketplace, including biodiesel, glycerin, renewable identification numbers (RINs), California’s Low-Carbon Fuel Standard (LCFS) credits and related certificate markets in Europe.