Rural Matters: Record Oil Imports Highlight Need for Domestic Content

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In recent years, the importation of used cooking oil (UCO) and tallow into the United States has surged, creating growing challenges for the domestic soybean industry and most importantly the profitability of the American farmer. If you’ve been around the blog for long you may remember the deep dive we did on this topic a few months ago. In this week’s edition, we’ll provide an update on the market situation, new policy initiatives, and the pathway forward on this issue going into the next Congress.

Growth of UCO and Tallow Imports

The volume of UCO and tallow imports into the U.S. has increased dramatically. In 2023, imports of UCO alone were sufficient to produce 600 million gallons of renewable diesel, far exceeding the U.S. Environmental Protection Agency’s (EPA) estimates by about 550 million gallons. From January 1, 2023, to June 30, 2024, the U.S. imported a total of 7.9 billion pounds of UCO and tallow, equivalent to the soybean oil crushed from over 650 million bushels. This surge has been driven by the high demand for low carbon intensity (CI) feedstocks in biofuel production, particularly in states like California with stringent environmental regulations.

Impact on the Domestic Soybean Industry

The American Soybean Association (ASA) has highlighted that these foreign feedstock imports have displaced over 500 million gallons of renewable diesel worth of domestic feedstock, with projections suggesting this could rise to a billion gallons or more in 2024. As of data from mid-November, in 2024 alone the U.S. has already imported enough UCO to displace the oil from more than 332 million bushels of soybeans, which is equivalents to the entire soybean crop from the state of Minnesota. This displacement has undermined the anticipated demand for soybean oil, which was expected to grow with the expansion of renewable diesel and sustainable aviation fuel sectors.

U.S. soybean farmers had planned to build 600 million bushels of additional crush capacity to meet this new demand. However, the competition from imported feedstocks has led to lower-than-expected demand for domestic soybean oil, resulting in crop prices nearing four-year lows. This situation has prompted U.S. farm groups and legislators to call for measures to protect the domestic soybean farmers and processors from the adverse effects of these imports.

Legislative Response

In response to these challenges, U.S. legislators have sent several letters to the administration drawing attention to the issue, and introduced several bills aimed at supporting domestic feedstocks. The “Farmer First Fuel Incentives Act,” introduced by Senators Sherrod Brown (OH) and Roger Marshall (KS), and Representatives Tracey Mann (KS) and Marcy Kaptur (OH), seeks to restrict eligibility for the Section 45Z Clean Fuel Production Tax Credit to fuels produced from domestically-sourced feedstocks. This legislation also proposes extending the 45Z tax credit to 2034, providing long-term support for the domestic biofuels industry.

Industry leading trade associations, such as the American Farm Bureau Federation, American Soybean Association, National Corn Growers Association, National Farmers Union, National Oilseed Processors Association, Growth Energy and many others, have been vocally supported of this effort, emphasizing the need to prioritize U.S. feedstocks in biofuel production. They argue that without such measures, the 45Z tax credit will continue to incentivize the use of foreign feedstocks over those grown by U.S. farmers, undermining the investments made to expand U.S. crush capacity.

Landus Policy Position

At Landus, we strongly echo the sentiment that American programs, developed to incentivize American production and paid for with American tax dollars, should utilize American feedstocks. As such, we are engaging with policymakers, industry groups, and other stakeholders to advocate for the adoption of a domestic content requirement for 45Z tax credit eligibility. This stance aligns with the broader push from U.S. agricultural groups to ensure that domestic biofuel programs support American farmers and the domestic economy. While there may not be a legislative vehicle to get the bill passed yet this year, it is likely to continue to be a top priority going into the next Congress that starts on January 3, 2025.

For more information and updates on this issue, stay tuned to upcoming Rural Matters editions, and as always if you have questions or thoughts, please email Elizabeth Burns-Thompson.

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