Soybean Oil Surges With US Biofuel Quotas Expected by March

Soybean oil prices rose sharply on January 15, 2026, as traders anticipated the Trump administration's expected announcement of 2026 biofuel blending quotas by early March. The Environmental Protection Agency (EPA) is finalizing rules for biomass-based diesel, a category that includes soybean oil as a feedstock. Final details are expected to boost domestic production and support agricultural exports.

The EPA proposed a total of 5.61 billion gallons of bio-based diesel for 2026, up from 3.35 billion gallons in 2025. This represents a significant increase aimed at promoting domestic biofuel use and reducing reliance on imported fuels. Market participants have been waiting for clarity on this policy, which could impact soybean and soybean oil markets.

Soybean oil futures surged as much as 3.8%, their biggest intraday gain since August 22, 2025. Traders attributed the increase to expectations that the EPA will finalize its proposal soon. The agency has signaled its intention to finalize the rule by the end of January, with the final rule expected to be announced in early March.

The proposed policy marks a partial compromise between the biofuel and oil refining industries. The EPA has revised its approach to the "America First" policy by removing a plan that would have reduced renewable fuel credits for imported biofuels. This decision was made to avoid disrupting fuel markets and raising prices before the mid-term elections.

The EPA's proposed quotas reflect a broader effort to strengthen the biofuel sector. The agency has increased the overall biofuel blending volume from 22.33 billion gallons in 2025 to 24.02 billion gallons in 2026. This increase is designed to support domestic agriculture while balancing concerns from oil refiners over potential supply constraints.

The shift in policy comes at a time of uncertainty in global soybean markets. Shipments of U.S. soybeans were below expectations for much of 2025 after China halted purchases earlier in the year. However, recent reports show that China has now purchased over 8 million tons of U.S. soybeans out of a 12 million-ton target. Additional sales to unknown destinations suggest a recovery in export demand.

Analysts are closely watching how the final rule will affect market dynamics. Brett Gibbs of Bloomberg Intelligence noted that the increase in bio-based diesel targets could lead to a sharp rise in soybean oil consumption. This could help offset losses in other export markets and support soybean prices.

The EPA's decision also includes adjustments to the renewable identification number (RIN) program, which governs biofuel credits. By removing penalties on imported biofuels, the agency aims to avoid potential supply disruptions and price volatility. This shift is seen as a win for the soybean and biodiesel industries, which had pushed for the change.

The finalization of the 2026 biofuel quotas is expected to have ripple effects across multiple sectors. The policy is likely to boost soybean and soybean oil demand, benefit the agricultural sector, and influence renewable fuel markets. The outcome will also affect how the U.S. positions itself in global biofuel trade.

Why Did This Happen?

The EPA's decision reflects a compromise between two powerful industry groups. Biofuel producers lobbied for increased blending targets to support domestic crop markets, while oil refiners opposed proposals that could disrupt supply chains or raise fuel costs. The agency's revised approach removes a controversial proposal to limit credits for imported biofuels, addressing refiners' concerns.

The decision also aligns with broader U.S. economic policies. The administration has emphasized support for domestic agriculture and energy production, while also seeking to maintain affordable fuel prices. The EPA's approach balances these priorities by increasing biofuel targets without imposing new restrictions on imports.

The timing of the announcement is also politically significant. With mid-term elections approaching, the administration is keen to avoid any policy that could lead to higher fuel prices. By removing the import penalty, the EPA reduces the risk of market volatility and keeps fuel prices stable.

How Did Markets React?

Soybean oil futures responded quickly to the news, surging as much as 3.8% on January 15. This was the largest intraday gain since August 22. The market's reaction suggests strong demand for the commodity, driven by expectations of higher biofuel usage in 2026.

Whole soybean futures also rose, climbing as much as 1.5%. The USDA reported five export sales, including 204,000 tons of U.S. soybeans to China. This data reinforced expectations of increased export demand and supported prices.

Canadian canola futures also rose, up as much as 2.2%. The market reaction was driven by news that Canadian Prime Minister Mark Carney will meet with Chinese leaders to seek relief from Beijing's duties on Canadian agricultural products.

What Are Analysts Watching Next?

Analysts are now focused on the finalization of the EPA's rule and its long-term implications. The proposed increase in bio-based diesel targets could lead to a surge in soybean oil consumption and boost U.S. agricultural exports. However, the success of the policy will depend on how well it balances the needs of different industry stakeholders.

Market participants are also watching for any changes in global soybean demand. While China has resumed purchases, the overall trend in global demand remains uncertain. Any shift in Chinese or other major buyers' purchasing patterns could influence soybean prices and the biofuel sector.

The EPA's decision also has implications for the renewable energy sector. The agency's revised approach could encourage more investment in biofuel infrastructure and support the growth of domestic renewable energy production. This could help position the U.S. as a global leader in sustainable energy.