AgFocus: U.S. Biodiesel Outlook

The U.S. biodiesel industry is expected to remain commoditized with tightening margins and periods of negative returns. Low cost producers with access to adequate working capital and multiple feedstock sources are best positioned for success.

The highlights of this report include:

  • The U.S. biodiesel industry is expected to remain commoditized with tightening margins and periods of negative returns. Industry players best positioned for success will focus on becoming the low cost producer, gaining access to multiple feedstock sources, and accessing adequate working capital to withstand volatile margins.
  • In the wake of the November 15, 2013 announcement by the EPA regarding adjustments to the RFS, Rabobank believes biodiesel will fulfill the bulk of future increases to mandated biofuel production quotas.1 As a result, our long-term outlook for biodiesel demand is stable due to the RFS.
  • Profitability will likely depend upon the actions of the EPA as biodiesel is not yet economically competitive with petroleum diesel and the industry was created by legislation.
  • Increases in biodiesel production will bolster demand for soy oil, corn oil, canola oil, yellow grease, and palm oil, along with other, less common inputs.
  • With biodiesel feedstock being split roughly evenly between soy oil and all other sources, the fats and oils sector will benefit from intensified production.