10 Losers From EPA’s Recent RVO Announcement

EPA scored a big win for US Production Agriculture and the Biofuels industry last week.

Yesterday I shared thoughts on 10 winners from the EPA RVO announcement.

Today, let’s look at some losers.

 #1 Soybean Oil Food Refineries  

Soy crushers are arguably the biggest winners here overall. 

That said, soy crushers whose oil offtake is via a collocated food oil refinery….they have some work to do. 

We need a chunk of the soybean oil currently in food to shift into renewables. That will push food customers into Canadian canola oil sellers, potentially palm oil even. 

That leaves soy food oil refineries in the lurch. 

Some can pivot, bring in canola to refine and ship out to food customers. But not without capex. 

Others, they simply can’t logistically make it work. Which means their refinery is going to be grossly underutilized. 

 #2 Soybean Programs Targeting Food Oil Traits 

There are various commercial soybean programs in the US focusing on oil traits that cater specifically to food demand, low linoleic oil being one of them. 

Historically SBO played the role of the cheap “base” oil from which the other oils added their price premiums. 

Bean oil looks to be an expensive oil in the US going forward. 

Its going to be challenging to iterate food oil seed traits in soybeans when canola and other oils are more competitively priced.

 #3 State Mandated LCFS Shorts 

Imported feedstocks now generating 50% the RINs vs domestic feedstocks….this hammers state LCFS credit buyers. 

Imported low CI feedstock plays a huge role in satisfying state LCFS mandates. The EPA move essentially shifts that 50% RIN value loss directly onto the state credit buyers. 

Their carbon targets remain the same, but their cost to supply imported feedstocks just jumped by up to 50% of the RIN value. 

I’m interested to see how this pain gets shared. How much ends up in domestic Tallow/UCO shippers’ pockets vs reduced import prices for feedstocks vs other optionality place at the state level. 

It’s a fact though, this change is a net negative for state carbon credit shorts.

 #4 Coastal Tank Terminals 

UCO and Tallow imports will slow in 2026. This will hit tank terminals that make their living in the veg oil space. 

There is opportunity to capture some palm import business headed to feed/food demand. That market suffered this year and I expect a rebound to cover food demand shifting out of soy. 

But it won’t offset the damage from a few million tons of UCO/Tallow no longer arriving. 

Ditto for SBO exports. Game over save for the most reliant countries that have few other options.

 #5 UCO/Tallow Importers 

No surprise here.

The EPA took a sledgehammer to import parities via the 50% reduction in RIN generations for imported feedstocks.

I wonder how much imports go down in volume vs just dropping their price to stay competitive. 

With bean oil trading over $200/mt premium to palm today, there is still likely incentive to keep shipping to the USA.

 #6 International UCO Fraudsters 

Given financial incentive, fraud shows up. 

And itshard to keep up with the ingenuity of the scammers.

We see this time and again in the EU biofuels space, and to a lesser extent in the US. It’s a constant game of whack-a-mole to fight back fraudulent imported product. 

But the EPA didn’t use a scalpel to address fraud this week, they used a machete. By taking away 50% of the RIN value on imports it massively reduces the incentive to send fraudulent feedstock into the US. 

I fear this shifts the burden onto LCFS states to fight the scourge, as what is imported will now be even more concentrated there. 

 #7 Double Crop Wheat 

Double crop wheat has been dying a slow death for a while now.

In regions where its possible to plant winter wheat and then follow with beans there are a few challenges. 

1)  The wheat harvest isn’t big enough to build a milling business around, so its usually dependent on export demand to get a decent price.  

2)  Often in these warmer regions, early summer rains make a mess of the maturing wheat, creating massive discounts for off quality.  

3)  The growing days used to finish the wheat crop (May and early June) reduce bean yield potential, and the loss in bean revenue makes the wheat crop economically unviable.  

Its this third issue that is a challenge now. Bean prices should lead for a while as we sort out a new acreage baseline to support growing crush. 

Additionally oilseed double crops, like winter canola or camelina, now have a leg up over wheat prices. 

I expect growth in oilseed winter crops in regions where climate and markets can support it. 

 #8 Cottonseed Crush 

EPAs RVO increases assail cottonseed crush three ways. 

1)  It creates an incentive to grow more beans at the expense of cotton acres.  

2)  It puts downward pressure on cottonseed meal prices via competing soybean meal. 

3)  It erodes away at the reason to crush cottonseed in the first place, a high priced oil product. 

This third point is big threat.

Whole cottonseed is a dairy feedstuff. Cows like it and its provides protein, fiber & necessary fat in their ration. 

Crushing cottonseed removes the oil from the seed. The byproduct, cottonseed meal, is sold to……dairies. Dairies then buy a different fat to fill out their ration since the cottonseed oil was removed when the seed was crushed. 

When cottonseed oil is more expensive than a replacement fat, it makes sense to crush the seed. When its not, what’s the point? 

That’s the dilemma today. Whole seed supply is down, and dairies want it. Cottonseed has little reason to be priced above other oils. 

So why even crush the seed in the first place?

It’s a tough spot.

 #9 Mid Protein Feedstuff Marketers 

Soybean meal is going to be looking for a bid. 

We are already feeling substantial pressure from the ~10% added crush that’s come online recently, with meal basis hitting historic lows a couple times this crop year.

More crush is coming. 

If you are selling coproducts like DDGs, Wheat midds, or other mid protein byproducts its going to be tough sledding. 

I feel for you.

 #10 Export Grain Terminals 

Simple arithmetic here. 

More beans crushed equals less beans exported. 

But the story is a little more nuanced. 

As beans prices move higher than export parities, it puts upward pressure on corn too. 

This in turn makes US corn less export competitive. 

There’s offsets with growing meal exports. 

But the path of least resistance is the US grain market gets more and more inwardly focused, taking care of our own legislated biofuel markets. 

Long term, that’s a headwind for export terminals.

That’s my list.  Have any to add?  Think I’m off base on some of these?  Let me know!