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FRIDAY, SEPTEMBER 18, 2026 | SPECIAL REPORT & ANALYSIS
SPECIAL REPORT | BIOFUELS EXPLAINER
Biofuels, Explained: Why Washington’s Big Promises Haven’t Reached the Soybean Market Yet
A plain-English guide to the tax credit, the fuel mandate and the carbon score, and why the money is arriving more slowly than the headlines suggested
Analysis · September 18, 2026
Readers of our initial special report on the 45Z credit and the Renewable Fuel Standard, which went deep into the details, asked for a cheat-sheet version they could use to make sense of a complex topic. This is that version: the same policy, stripped to the pieces that matter for corn, soybean oil and manure, and an explanation of why the money is arriving more slowly than the headlines suggested.
THE TWO LEVERS: A MANDATE AND A TAX CREDIT
Start with the basic idea. The federal government wants more fuel made from crops, animal fat and waste, and less made from crude oil. It pushes that along in two ways. First, it tells oil refiners they must blend a set amount of renewable fuel every year; that is the Renewable Fuel Standard, or RFS. Second, it pays fuel producers a tax credit for each gallon of clean fuel they make; the current version is called 45Z, after the section of the tax code. Farmers care because the raw material for most of this fuel is corn, soybean oil and, increasingly, manure.
HOW THE MANDATE WORKS: RINS AND EXEMPTIONS
The mandate works like a permit system. Every gallon of renewable fuel that gets made comes with a certificate called a RIN. Refiners must turn in enough RINs each year to prove they met their blending obligation. If they didn’t blend enough themselves, they buy RINs from someone who did. That is why RIN prices matter to farmers: when RINs are expensive, refiners have a strong reason to buy more biofuel, and that pulls on corn and soybean oil demand. When refiners are excused from the rule, which happens when EPA grants “small refinery exemptions,” fewer RINs are needed and the pull weakens. EPA excused 29 refineries for 2025 last month and promised to make the rest of the industry cover the difference later, but that promise is not yet a rule.
THE TAX CREDIT: A CARBON SCORE, NOT A FLAT DOLLAR
The tax credit no longer pays the same for every gallon. The old credit was simple: $1 for every gallon of biodiesel or renewable diesel, no matter what it was made from. The new 45Z credit pays according to a carbon score. Think of the score as a golf score, where lower is better. A fuel with a low score gets the full credit; a higher score gets less. Fuel made from used cooking oil or beef tallow scores well because it is made from waste. Fuel made from soybean oil scores worse, because growing the beans, hauling them and crushing them all count against it. In practice that means a refiner choosing between soybean oil and a cheaper waste fat now has a tax reason to pick the waste fat.
THE MANURE EXCEPTION: A SCORE BELOW ZERO
One kind of fuel gets a score below zero. Gas captured from hog and dairy manure pits, cleaned up and put into the natural gas pipeline, is treated as removing pollution rather than adding it, because the methane would otherwise have escaped into the air. Its score can go negative, and the credit keeps climbing as the score falls. A fuel with a score of zero earns $1 per gallon-equivalent; a manure gas score of -100 earns $3. No other fuel is allowed to do this, and for now only dairy and hog manure qualify, with poultry and cattle expected to be added later. It is the richest deal in the program, and most of the digesters that capture the gas are owned by outside investors rather than the farmers who supply the manure.
WHY SOYBEAN OIL HASN’T MOVED: EVERY PIECE IS DELAYED
So why hasn’t all this lifted soybean oil? Because nearly every piece that would turn the policy into real demand has been delayed. The Treasury Department’s detailed rules for the tax credit have been “proposed” since February and are still not final. The rule that would have penalized fuel made from imported cooking oil, which would have pushed refiners toward American soybean oil, was put off until 2028. The makeup for those refinery exemptions is a promise, not a rule. Even the deadline for refiners to prove they met last year’s mandate was pushed back to Oct. 1. Every delay lets a refiner wait, and when buyers wait, prices sag.
WHAT THE MARKET IS SAYING
The market is saying exactly that. Soybean oil futures have moved into what traders call a carry, meaning later-month contracts are priced above the nearby month. That is the market’s way of saying there is plenty of oil available right now and no urgency to buy it. Part of that is harvest, when new supply comes in and crushing plants have plenty of beans to work with. But part of it is the policy delay. The mandate says demand is coming; the market is pricing the fact that it hasn’t arrived.
THE CLOCK: 45Z EXPIRES AT THE END OF 2029
There is a clock on all of this. The 45Z credit expires at the end of 2029, four tax years from now. Building a new plant, a carbon-capture system or a manure digester takes two to three years, so a project started today might collect the credit for only two years before it disappears. That favors companies that already have plants running over anyone trying to build one, and it is one more reason the industry is moving cautiously.
BOTTOM LINE
Upshot:the government has written a generous set of rules for clean fuel, and in time those rules should mean more demand for American crops. But the rules are not finished, the enforcement is not tight, and the deadline is close. Until Washington closes those gaps, the promise will keep showing up in the headlines before it shows up in the price of soybean oil.
AG POLICY & MARKETS DAILY | SPECIAL REPORT | BIOFUELS EXPLAINER — FRIDAY, SEPTEMBER 18, 2026 | SPECIAL REPORT & ANALYSIS
