Biofuel Feedstocks: The New Gold Rush as U.S. Regulations Squeeze Foreign Competition

The U.S. biofuel industry is on the brink of a seismic shift. Proposed regulations from the EPA and Congress aim to slash the competitiveness of imported biofuels and feedstocks, creating a structural tailwind for domestic suppliers of soybean oil, used cooking oil (UCO), and distillers corn oil (DCO). Investors who position themselves now could capitalize on a rare alignment of policy, price volatility, and long-term demand growth.

The Regulatory Double Whammy: EPA RIN Cuts + House Tax Credit Restrictions

The EPA's proposed rule to reduce Renewable Identification Numbers (RINs) for imported biofuels by 50%—finalized as early as July 2025—strikes at the heart of foreign competition. RINs are the currency of compliance for oil refineries under the Renewable Fuel Standard (RFS). By halving the RIN value for imported fuels, the EPA incentivizes producers to switch to domestic feedstocks.

Meanwhile, the House-passed bill (expected to reach the Senate this fall) blocks tax credits for biofuels using imported feedstocks. This ensures that only domestically sourced materials qualify for the lucrative $1.00/gallon biodiesel tax credit. Together, these measures will create a $1.5 billion annual market shift toward U.S. feedstocks by 2027, according to EPA estimates.

Why Domestic Feedstocks Win

1. Soybean Oil: A cornerstone of renewable diesel, soybean oil is now critical as producers pivot from cheaper imports like Chinese UCO. The USDA forecasts U.S. soybean crush capacity to expand by 20% by 2026 to meet demand.
2. Used Cooking Oil (UCO): Domestic UCO prices have already surged 30% YTD as refiners scramble to secure local supplies. Companies like Waste Management (WM) and Republic Services (RSG) dominate this space.
3. Distillers Corn Oil (DCO): A byproduct of ethanol production, DCO's usage in biodiesel is set to double as foreign feedstocks are priced out.

Short-Term Volatility, Long-Term Goldmine

The path to this “goldmine” is bumpy. The EPA's July 2025 rule finalization and the Senate's vote on the tax bill will create three key catalysts for price swings:
- July 2025: If the EPA confirms the 50% RIN cut, soybean oil and DCO prices could spike further.
- Q4 2025: Senate passage of the House bill would lock in tax credit exclusivity for domestic feedstocks.
- 2026–2027: Mandates for biomass-based diesel jump to 7.5 billion gallons, requiring massive feedstock sourcing.

Investors should expect 20–30% swings in feedstock prices around these milestones. For example, in June 2025, soybean oil futures jumped 15% in a week after the EPA's proposal was leaked.

Investment Playbook: Stocks and ETFs to Watch

1. Agribusiness Giants:
2. Archer Daniels Midland (ADM): Processes 30% of U.S. soybeans and is expanding its renewable diesel capacity.
3. Bunge (BG): Controls key soybean crushing facilities and has partnerships with renewable diesel producers.

4. Cargill (private): While not publicly traded, its feedstock suppliers (like Wilmar International) could benefit.

5. Renewable Diesel Producers:

6. Neste (NEVT): Despite relying on imports, Neste is pivoting to U.S. feedstocks. Its stock could rebound if it adapts quickly.

7. Gevo (GEVO): A smaller player with a focus on corn-based fuels—high risk but high reward.

8. ETFs:

9. Invesco Agriculture ETF (ARCA): Tracks companies involved in agriculture and commodities.
10. Global X Renewable Energy ETF (RENW): Includes biodiesel and ethanol producers.

Risks to Consider

• Regulatory Delays: The EPA's rule could face legal challenges from import-dependent firms like Valero (VLO) or Marathon Petroleum (MPC).
• Global Supply Shifts: Competing nations may retaliate with tariffs or subsidies, squeezing U.S. exporters.
• Overcapacity: A rush to build domestic feedstock infrastructure could lead to oversupply by 2027.

Timing the Trade

• Now (Pre-July 2025): Buy ADM and ARCA as a hedge against the EPA's rule.
• Post-July 2025: If the rule passes, pivot to RENW and small-cap producers like Gevo.
• Q4 2025: After the Senate vote, lock in long positions in soybean futures contracts.

Conclusion

The U.S. biofuel feedstock market is entering a decade-defining consolidation period. With policy backing, domestic suppliers are set to dominate a shrinking global pie. Investors who act before the July 2025 rule finalization and the Senate's tax bill vote will be best positioned to profit from this shift. The risks are real, but the structural tailwinds are undeniable—this is a play for patient, policy-aware investors.

Recommendation: Allocate 5–10% of a portfolio to ARCA and ADM, with a 10% stop-loss on EPA rule delays. For aggressive investors, add a 5% position in GEVO via options ahead of the Senate vote.

Data sources: EPA RFS proposals, USDA feedstock reports, company investor presentations.