-KANSAS CITY, MISSOURI, US — The transition to the second Trump administration is quickly approaching, and the roster of its leadership team is coming into sharper focus, but deep uncertainties remain about the incoming administration’s impact on certain policies, including measures that directly affect the biofuels industry and its rapidly escalating affinity for implementing imported used cooking oil (UCO) as a feedstock.
Incentives from federal and state governments have fueled a rampant demand for feedstocks that help minimize biofuel manufacturers’ carbon footprint, and UCO has one of the lowest carbon intensity scores. Currently, the United States is a net importer of UCO, transitioning in just a few years from annually importing less than 200 million pounds (90,718 kilograms) to importing more than 3 billion pounds (1.36 million kg) in 2023. During the first nine months of 2024, imports of UCO practically doubled compared to the same period in 2023, according to data from the US Census Bureau.
Additionally, UCO feedstocks often provide a wider profit margin for biofuel manufacturers compared to other inputs. Based on pricing data collected by Sosland Publishing Co., the average price of UCO from July to November was 42.75¢ a pound, compared with the average price of soybean oil at 45¢ a pound during the same period.
The primary issue with UCO, however, especially during this juncture of segueing administrations, is that well over half of current UCO imports come from China, and President-elect Trump not only actively campaigned on the promise to impose extensive tariffs on imports of Chinese goods during his second term, but he is also well known for enacting heavy tariffs on the Asian country during his first term in 2018, effectively costing US agriculture more than $27 billion, according to a report issued by the Economic Research Service of the US Department of Agriculture.
“The way the Trump administration seems to be shaping up, you’re going to eliminate subsidies for anything imported, and there’s a possibility that used cooking oil could go away altogether,” said Brian Harris, executive director and co-owner of Global Risk Management.
China already has begun steeling itself against potential US tariffs. In mid-November China’s finance ministry said the country on Dec. 1 was planning to reduce or cancel tax rebates offered to exporters of certain commodities, including UCO.
After the news was announced, CME Group soybean oil futures jumped 2%. Since then, however, the January contract has fallen more than 7% and is sharply down more than 12% from the November high reached following the US presidential election results. Certainly not all of the market activity in soybean oil futures is related to UCOs.
Some analysts believe China’s recent retraction of export incentives may have minimal impact on the pace of UCO shipments to the United States. Others, like Harris, foresee a potentially bullish opportunity for domestic soybean oil markets.
“Used cooking oil imports going away altogether would be the most extreme case,” Harris said. “The less extreme is it would be heavily dutied. Both cases would force demand into the soybean oil market because of the volume of bean oil we produce and the ability to capture at least some credit there, maybe not as much as the other oils provide, but at least there is some.”
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