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Oct 14, 2026
By ASA Economics Intern Taylor Gillit & ASA Chief Economist Scott Gerlt, PhD
For decades, export demand was the primary driver of growth for the U.S. soybean industry. Recently, challenges in export markets have coincided with the rapid expansion of domestic demand for soybean oil used as a biofuel feedstock in renewable diesel and biodiesel.
Between 2020 and 2025, the quantity of soybean oil allocated to biofuel production increased from nearly 8.9 billion pounds to approximately 14 billion pounds, creating an important new source of domestic demand and encouraging investment in soybean crushing capacity (Figure 1). At the same time, export demand remains below historical levels, raising an important economic question: Has growing domestic biofuel demand been sufficient to offset weaker export demand to maintain U.S. soybean prices?
To answer this question, an updated eeconomic model[1] of the U.S. soybean sector was used to estimate soybean price impacts from current events including trade shocks and increases in biofuel blending obligations. Counterfactual scenarios of export demand and soybean oil demand for biofuel production remaining at marketing year (MY) 23/24 levels were observed for this analysis. Comparing these benchmark market conditions with subsequent market conditions allows a measurement of weaker whole bean export demand and stronger domestic biofuel demand on soy prices (whole bean, oil, and meal), as well as commodity revenues.
Importantly, demand curves were set to the MY 23/24 levels for the selected variables. Supply and demand curves for all other variables were unchanged from their current years. A demand curve measures changes in quantity demanded due to a change in price. It is not the actual quantity but a mapping of prices to quantities. An easy way to interpret these results is to view the price change as the loss or gain experienced from the change in the exports from MY 23/24 levels. All the results should be compared to the MY 23/24 demand and should not be regarded as the total value of the sector.
This analysis allows for an examination of price impacts both without the changes in whole soybean export demand and domestic biofuel demand since MY 23/24. The model does not consider specific events, such as foreign tariffs or changes in blending obligations. Instead, it captures all developments in the market. As such, it also reflects crop conditions in South America, changes in biofuel tax policy, competing biofuel feedstock imports and other developments.
The MY 24/25 to MY 26/27 market years were considered in the analysis. Additionally, soybean production was held constant for MY 25/26 to analyze price responses when export demand changes after the growing season had already begun. The trade war with China started in February 2025 and escalated in April 2025, limiting farmers’ ability to respond through acreage adjustments. The MY 25/26 and MY 26/27 marketing years have not been finalized, so the October 2026 USDA World Agricultural Supply and Demand Estimates (WASDE) estimates and revisions were used as the baseline for those years.
Export demand remains an important driver of soybean prices across the observed period, although the relative influence of trade and biofuel demand varies by marketing year. In MY 24/25 and MY 25/26, changes in export demand consistently have a larger effect on soybean prices. Conversely, in MY 26/27, the estimated positive effect of biofuel demand offsets the negative effect of changes in export demand. Table 1 reports the estimated contribution of changes in export demand and soybean oil demand for biofuel production to soybean prices.
Changes in export demand since MY 23/24 accounted for an estimated $0.81 per bushel decline in soybean prices in MY 24/25. Changes in domestic biofuel demand contributed an additional $0.06 per bushel decline, resulting in a combined estimated price reduction of $0.87 per bushel. The biofuel effect on soybeans was $0.06 per bushel lower in MY 24/25 than in MY 23/24. This was due to low 2023-2025 renewable volume obligations through the Renewable Fuel Standard, which triggered volume reductions at many biodiesel facilities in early 2025. The biofuel tax credit changed from $1.00 per gallon in 2024 (40A Biofuel Blenders Credit) to a lower and variable rate in 2025 (45Z Clean Fuel Production Credit). Soybean oil volumes used in biofuels plummeted in early 2025. Production accelerated in 2024 to maximize the credit value, leading to a collapse in 2025 Biomass-Based Diesel (BBD) production after low blending obligations could not support the production.
More recent years tell a somewhat different story. Relative to MY 23/24 demand conditions, weaker export demand continues to account for the largest decline in soybean prices, reducing prices by as much as $1.60 per bushel under the projected MY 25/26 market conditions. Holding soybean production fixed for MY 25/26 illustrates how prices respond when producers cannot adjust production following the sudden decline in export demand. Under this assumption, the estimated price decline increases to $2.10 per bushel because more of the market adjustment occurs through prices rather than production.
This sharp decline occurred during the period of trade disruptions with China. While the country historically buys 22 MMT or more of U.S. soy per marketing year, China is on track to purchase a little over 12 MMT in marketing year MY 26/27. However, export demand has weakened every year since MY 23/24. Part of the decline in prices is due Brazil producing a short crop in MY 23/24 while China’s import demand remained high. Since then, Brazilian production has increased every year since the MY 23/24 drought, shifting the excess demand curve for U.S. soy inward.
The resumption of normal soybean exports to China is expected to have a marked effect on soy prices for MY 26/27. The year-over-year increase is estimated at about $1.40 to $1.90 per bushel, depending on assumptions about how much MY 25/26 production responded to the trade war. This result is based on October 2026 WASDE projections which are subject to change as the marketing year develops. As such, the MY 26/27 results should be treated as provisional.
In contrast, projected growth in domestic biofuel demand provides upward support for soybean prices, increasing prices above MY 23/24 levels by an estimated $0.22 per bushel in MY 25/26 and $0.42 per bushel in MY 26/27. Expanding biofuel production drives a recovery in soybean oil use for biofuels and adds value to soybeans. The MY 25/26 marketing year reflects a $0.22-per-bushel increase in value due to biofuel demand, with another $0.20 per bushel expected for the crop currently in the ground. The value-add from biofuels is projected to support capacity growth in the biofuel and crush industries for at least the next three years.
Although increasing biofuel demand has lifted soybean prices, the gains have been less than the fall from export demand through MY 25/26. In MY 24/25, the net of the two was a decrease of $0.87 per bushel. For MY 25/26, the estimate is $1.38 to $1.81 loss per bushel, depending on assumptions about farmers' ability to respond to the market conditions. The $0.22 to $0.29 per bushel in market gain from biofuels simply was not enough to offset the trade losses of $1.60 to $2.10 per bushel. However, revived soybean export purchases from China and the expanding value of biofuels are projected to have a net price increase of $0.18 per bushel in MY 26/27, conditional on the October 2026 WASDE estimates and projections being realized.
Soybean oil is directly used as a feedstock for biomass-based diesel and renewable diesel production, making domestic biofuel demand a key driver of soybean oil prices. While weaker whole soybean export demand reduces soybean oil prices by increasing domestic supply of whole soybeans, projected growth in biofuel demand more than offsets the export effect under the projected market conditions. Table 2 reports the estimated contribution of changes in whole soybean export demand and soybean oil demand for biofuel production to soybean oil prices.
Weaker export whole soybean demand reduced soybean oil prices by an estimated 1.80 cents per pound under observed MY 24/25 market conditions. At the same time, lower domestic biofuel demand reduced soybean oil prices by an additional 2.17 cents per pound over the marketing year, reflecting reduced soybean oil demand for biofuel production from MY 23/24 levels following the reduced output of biomass-based diesel during 2025. Because export demand and biofuel demand were both weaker than in the MY 23/24 benchmark year, their effects reinforced one another, resulting in soybean oil prices 3.97 cents per pound lower than under MY 23/24 demand conditions.
The projected market conditions for MY 25/26 and MY 26/27 tell a different story. While weaker export demand places downward pressure on soybean oil prices, projected growth in domestic biofuel demand becomes the dominant force affecting the soybean oil market. Because soybean oil is the primary feedstock for biodiesel and renewable diesel production, expanding biofuel production directly increases demand for soybean oil, raising its value.
The projected increase in soybean oil demand reflects biodiesel and renewable diesel production recovery from the temporary slowdown observed in 2025. As a result, the positive contribution of biofuel demand grows from 8.39 cents per pound in MY 25/26 to 15.67 cents per pound in MY 26/27, more than offsetting the downward pressure associated with weaker export demand. Holding soybean production fixed in MY 25/26 produces slightly larger price effects, reinforcing how limited short-run production adjustments amplify the market's response to changes in demand.
Consequently, the combined effect reduces soybean oil prices by 3.97 cents per pound in MY 24/25 that reverse to gains in MY 25/26 and MY 26/27, relative to MY 23/24 demand conditions. These results illustrate how soybean oil prices have become increasingly influenced by domestic energy markets as well as traditional agricultural markets. While export demand continues to affect soybean oil prices indirectly through changes in soybean crushing, expanding biofuel production increasingly determines the value of soybean oil itself.
Soybean meal is a coproduct of soybean crushing, therefore its price depends on not just soybean meal demand, but also soybean oil demand. More soybeans are crushed for soybean oil when domestic biofuel demand increases which raises soybean meal production and places downward pressure on soybean meal prices. Combined with weaker export whole soybean demand, these markets result in substantially lower soybean meal prices than if export demand and domestic biofuel demand had remained at MY 23/24 levels.
Under observed MY 24/25 market conditions, soybean meal prices were also influenced by changes in both export and domestic biofuel demand relative to MY 23/24. Weaker export demand lowered soybean meal prices by an estimated $11.61 per short ton. However, because domestic biofuel demand remained below MY 23/24 levels, its effect moved in the opposite direction. Soybean meal prices increased by approximately $3.78 per short ton from biofuels, partially offsetting the export-related decline.
Like soybean oil, under the projected market conditions both demand factors contribute to lower soybean meal prices, although for different reasons. The effect of weaker whole soybean export demand remains negative throughout the projection period, while stronger domestic biofuel demand increasingly lowers soybean meal prices by expanding soybean processing and, consequently, soybean meal production. By MY 26/27, the estimated price effect from stronger biofuel demand reaches a $27.24-per-short-ton reduction, compared with the $3.44-per-short-ton effect associated with weaker export demand. These results suggest growth in domestic biofuel demand becomes the primary source of downward pressure on soybean meal prices.
Commodity revenues reflect the combined effects of changes in prices and production and therefore provide a broad measure of how changes in export and domestic biofuel demand affect the soybean sector. Table 4 reports the estimated contribution of each demand source to soybean commodity revenues relative to MY 23/24 demand conditions.
Relative to MY 23/24 demand for soybean exports, MY 24/25 soy producers lost at least $3.55 billion due to reduced demand from foreign markets. Although lower domestic biofuel demand also contributed to lower revenues, its effect was considerably smaller. Looking ahead, projected growth in domestic biofuel demand provides increased support for soybean commodity revenues. However, under the projected MY 26/27 market conditions, the contribution of stronger biofuel demand does replace the revenue losses associated with weaker export demand, conditional on the October 2026 WASDE projections.
These results illustrate how the U.S. soybean market has evolved in recent years. Expanding domestic biofuel production has created an important new source of demand for soybean oil, encouraging investment in crushing capacity and increasing domestic soybean utilization. This growth has also expanded soybean meal supplies and strengthened the links between biofuel, livestock feed, and food markets due to the soy crush process dynamics. The benefits of growing biofuel demand therefore extend beyond soybean oil alone, influencing markets throughout the soybean value chain.
At the same time, the results suggest expanding domestic biofuel demand has supplemented export demand, and under projected MY 26/27 market conditions, replaces the losses associated with weaker export demand. However, this finding is conditional on the October 2026 WASDE projections being realized, and changes in projected export or biofuel demand could alter the relative contributions of these markets. As U.S. soybean exports face increasing competition from Brazil and periods of trade uncertainty, continued growth in domestic biofuel production provides an important source of market stability and diversifies demand across domestic markets. Maintaining competitive export markets remains essential, as export demand continues to play a significant role in soybean prices and commodity revenues, even as domestic biofuel demand takes a larger role.
[1] The economic model used in this analysis was an equilibrium displacement model based on Lusk (2022) and updated using 2024/25 market data and parameter estimates. The construction and update of the model was financially supported by the United Soybean Board.
Lusk, J. 2022. “Food and Fuel: Modeling Food System Wide Impacts of Increase in Demand for Soybean Oil.” https://ag.purdue.edu/department/agecon/extension/extension-center-archive/center-for-food-demand-analysis-and-sustainability.html
USDA ERS (United States Department of Agriculture, Economic Research Service). 2026. Oil Crops Yearbook – Documentation. https://www.ers.usda.gov/publications/113677
USDA WASDE (United States Department of Agriculture) World Agricultural Outlook Board. 2026. World Agricultural Supply and Demand Estimates (WASDE). October 2026. https://www.usda.gov/oce/commodity/wasde/wasde1026.pdf
