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Surge in Green Diesel Feedstock Imports Disrupts US Soy Market: Bloomberg

A surge in imports of used cooking oil and other feedstocks for renewable diesel production is disrupting the US soybean processing industry, squeezing profit margins and forcing plant slowdowns, according to a report by Bloomberg.

The influx of foreign shipments of alternative feedstocks, such as tallow, used cooking oil, and canola oil, is challenging the market share of soybean oil, a key ingredient in renewable diesel. These alternatives often come at a lower cost and boast lower carbon-intensity scores, making them more attractive for biofuel producers seeking to maximize subsidies.

"The increased competition is raising questions about how much capacity will be needed going forward," Bloomberg reports. "Soyoil accounted for 32% of the feedstocks used to produce biodiesel in January, down from 44% a year earlier and a record low."

As a result of weaker demand for soybean oil, processing companies are implementing earlier and longer seasonal maintenance shutdowns. Bloomberg reports that a record 20 million bushels of crush capacity were offline in April, including at major plants operated by Archer-Daniels-Midland Co. and Cargill Inc.

The situation raises concerns about the future of the soybean processing industry, which has invested heavily in expanding capacity to meet the growing demand for renewable diesel. Some proposed expansion projects have been put on hold due to the increased competition from alternative feedstocks.

"Those projects that were well under way are going to continue and get completed," John Neppl of Bunge Global SA, told analysts in a conference call, cited by Bloomberg. "But really, anything that was proposed or in early stages, we've seen a number of those put on hold."

Industry experts are urging the Environmental Protection Agency to review its biofuel blending mandates under the Renewable Fuel Standard, which they argue have inadvertently created an uneven playing field for soybean oil.

With crush margins shrinking and competition intensifying, soybean processors are facing a challenging market environment. As the fall harvest approaches and more crush plants come online, the industry is bracing for further pressure.